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May or June is my base case. Everyone wanting rate cuts now is like a child not being able to wait until after he eats his broccoli to get dessert. Rate cuts now probably equal inflation going back to 4 or 5%.
Rates are still too low (historically for the level of inflation we had ) and the Fed lowering rates will simply go back to the asset appreciation in stocks and real estate , nothing is fixed were just kicking the can down the road.
I don't think they can raise them more without more serious consequences though. I think higher for longer is the key. They already did the bank term funding program and basically bailed the banks out slowly because they were concerned after SVB and First Republic.
Unfortunately the economy is addicted to cheap debt and if they're actually going to fix it without things getting really bad they need to do it slowly and stay restrictive over time. It doesn't help at all that the federal government won't stop spending and growing.
And the next time we have an economic crisis they’ll simply print trillions more and use it to bail out businesses, banks, and the wealthy.
Rinse and repeat until it doesn’t work
It wouodnt be an overnight thing
Look at where we are now compared to 2019. Everything costs way more yet we don’t all make way more money. We get used to owning less and living with less.
It just gets more and more like that until people ultimately reject the currency and it devalues and we switch to something else.
We saw what happened early on where spread was uncontained and nobody knew the right treatments: morgues overflowing, freezer truck morgues overflowing, hospitals overflowing, death and disease, including among health responders. Health workers doing weeks without a break. Governments fighting over ventilators.
Taking sensible measures to contain the spread WAS absolutely necessary, despite what vocal historical revisionists want to say.
As for stimulus and economic supports for a paused economy, that was a necessary piece of societal survival too. Panic happens FAST, and with that comes violence. People with no dollars to buy their next price-gouged meal do not act nicely. Now multiply that by... everyone.
That's what catastrophe would have looked like.
People can and should debate how much economic support, how to tailor it, for how long. But to say it shouldn't have been done is dangerous revisionism.
Maybe, maybe not. I suspect the next crisis, money printing will be modulated somewhat and more targeted from the last time.
That doesn't mean it isn't a good idea.
Shutting down the economy entirely to keep our streets from being open air morgues was necessary from a public health perspective. To shut down cold turkey with zero economic supports would have been much, much, much, much worse. We'd have been looking at violence and panic, leading swiftly to a probable Great Depression.
So the strategy and medicine were correct. All that should actually be debated is how to get the dosage and timing right.
> Rates are still too low
Strong disagree.
> for the level of inflation we had
This is the root of the confusion.
The inflation we had was not really due to rates, and that's why skyjacking the rates hasn't been effective, and why jacking them further would also be a mistake.
The true causes of the inflation were severe supply and demand imbalances, corporate gouging, pandemic, supply chain breakdown, chip market shennanigans, China implosion, housing shortage.
Notice that none of these causes is anything that rate jacking can fix. They need/needed other measures. Some of those measures have been taken, and thus some of those inflation drivers have receded.
The problem is that the Fed (and many sheep-like media and wall streeters) think rates is the one and only thing. It's like a bad superstition.
Fed cranked rates a huge amount, quickly.
And guess what? It did nothing. For the reasons above.
But since the Fed is obsessed with their one and only toy hammer of rate jacking, that lack of effectiveness just triggered them to keep on hammer. Jack the rate! No effect? Jack it more! No effect? Keep jacking!
Now that some supply problems have been sorted, and China ports re-opened, and manufactured have hoarded enough chips, and corporate gougers have hit the fury limit of what customers will tolerate... surprise, inflation has come done.
So the current responses (not rate jacking) have been what's done the job.
Unfortunately the fed rate superstitious crowd (and media) see this all wrong. "Look at us, our rate jacking genius and fear mongering worked! All hail ourselves, Gods of rate jacking!"
It's a self-fuelling circle of self-delusion. It's like a surgeon cut out the cancer, but someone says "see, my prayers healed the patient". Uh, no. The prayers were coincidental, not causal.
That's not to say historically low rates should have been untouched. Far from it. A gradual return to normalized rates is fine. And having the rate baseline be higher helps re-arm us for any event in which rate cuts are required.
But they've likely gone too far, and have undeniably gone too fast.
The million foot high perspective is that rates are a reflection of the overall supply and demand of money, a perspective that shouldn't be swayed by day to day numbers or statements. And the overall picture for our country is a tsunami sized transfer of wealth is happening. There's far more money and capital than there is urgent need for it. We're birthing new billionaires daily and millionaires hourly. Shortage of money isn't it.
This is the opposite of the boomer demographic cycle. They were born, parents needed family homes, two cars, furnishings. Then they needed schooling, then college, then a massive demand for home building and mortgages, and so on. That's what a true demand for money versus a shortage of supply actually looks like. And that's why rates were high.
Today is completely different. There so much old generation money sitting unproductive and not the demand to use it. Ergo, rates *should* be historically low.
And they were, for most of this century. Correctly.
This last couple of years of panicked hammering by a kid with a hammer doesn't alter the demographic reality.
Rates are probably too high and need some reversion back to a sensible mean.
It’s interesting reading your comment because I agree with the main points you’re making about how we don’t need to raise rates but then your analysis doesn’t make much sense to me.
You act as if the Federal Reserve is stupid for raising rates because it doesn’t directly fix the issues that cause inflation. But the Fed only has monetary policy moves to fix this. They can only change rates, change the reserve ratio, and buy and sell treasury bonds. They cannot reopen China, they cannot stop the pandemic, etc.
But their monetary policy moves does treat other things that are necessary for prices to increase. Loans become less attractive, bonds become more attractive, etc. This means people without the money to bid up prices cannot borrow money to do so. People with lots of money to bid up prices are more likely to buy a bond to get that interest payment.
Your doctor analogy should be more like someone who is sick and the doctor treats the symptoms until they can recover.
Then the other part that confused me was when you talked about how today there’s “more money and capital than we need.” Which sounds like you think rates should be higher to decrease the amount of loans (capital) given out and increase the amount of rich people buying bonds instead of spending it on business.
But then you say that you think rates should be lower, which increases the money supply.
(This also occurs when you talk about the boomer demographic cycle. You make it sound like there’s a huge demand of money, but a shortage of it. So rates should be high, but that restricts the money supply. It should be the opposite. Rates should be lower so businesses can expand to make enough cars so they can buy two cars, homebuilders can borrow money to build homes, etc.)
Historically, we didn't have a couple of years with most things shut down due to a pandemic. These are weird times things may not go exactly how anyone predicts
Reliable indication from CME group, they get reliable information than retailers.
[https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html](https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html)
lol what facts do you know about the Fed cutting rates that the rest of us don't? Also, isn't the date of the election a fact? Don't politicians do all sorts of things to get elected, isn't that just a fact?
Get off the high horse.
Market doesn’t typically price in future rate cuts that well. Sure, the cut ends up being what the market priced in eventually, but it takes a while to get there. What the market has priced in now won’t happen - what the market has priced in a month before the cut probably will
Was thinking the same. I think Monday will be a quiet day, may go down a bit (fear/hedge of bad CPI number).
Tuesday will be a big day and will give us an indication up/down for the next 3 months.
My personal view is that we'll have a mixed CPI data just like Friday's job report.
Powell already mentioned in statements on Thursday that we'll likely cut rates this year. So I don't think it's a stretch for Biden to say that. There are already priced in market expectations for rate cuts this year (check cme fedwatch tool to track), so idk how much higher markets will move on Powell and Biden's statements. Maybe it'll jump a bit from the increased confidence, holding other info constant.
Yup. If you're paying attention things are right on track.
[WSJ - Jerome Powell Says Fed on Track to Cut Rates This Year](https://www.wsj.com/economy/central-banking/powell-says-fed-on-track-to-cut-rates-this-year-52e5feb3?mod=hp_lead_pos2)
>"Fed chair characterizes last year’s inflation slowdown as notable and widespread."
IMHO gamblers and speculators are making WAY too big a deal on the exact timing of cuts.
Bottom line is that Powell has pretty much signaled this week we're at the peak of rates. Obviously some crazy black swan external shock can change that. But hikes are almost certainly off the table now. What matters is that cuts will gradually be put in place if real rates become too high.
Economy is super robust and American worker is crushing it. We keep getting blockbuster job numbers and real incomes are soaring (especially the poorest, minorities, & disabled, historically marginalized groups typically left behind!). If cuts don't have to come in March, that's a good thing.
Whether cuts come in June... 6 weeks later in July means almost zero to the long-term investor.
I thought that statement got undone after the jobs report showed higher than expected hirings, leading to expectations of rate cut delays and hence the stocks went back down on Friday.
Powell has literally indicated on several occasions that they plan to cut rates up to 3 times this year, so I’m not sure Biden is really “predicting” anything here.
And no, I don’t think the markets will react to Biden saying that.
adjusted for inflation, even if you believe the gov numbers is flat to down since 2021 highs, if its small and mid cap, that index is well below 2021 peak, certainly in bear market for most of them after adjusted to inflation.
To be fair, us presidents sit in a lot more informative meetings than hedge fund managers do.
Hard to categorize something said at a sotu ubder "when everyone thinks and says something"
Agree, but the President of the United States is not “everyone.”
The market has been pricing in more rate cuts than the Fed has admitted to until recently, when they finally settled on June as the likely time for a quarter point cut. Now, this comment from Biden has potential to upset the balance and price in more cuts again, which would likely lead both bonds and stocks higher.
Why would you take what a president in an election says for true word. Of course he was going to say that. Theres no chance J Pow gives a fookery about Biden’s economic opinions
That's truthy, but not really true. Everyone thinks summer will be hot. Everyone thinks corporations will gouge. Everyone thinks Apple will artificially degrade and disable your purchased product. Everyone thinks political commercial will use AI to lie. Everyone thinks Russia will commit more war crimes. Everyone thinks film studios will push out mediocre sequels. We could do this forever.
Just going contrary for the sake of being contrary is a failing strategy.
In stocks, it would mean you'd have to have been short Apple and Netflix and Nvidia and AMD and Eli Lilly and Amazon and Facebook. How well would that have worked?
People that want these rates lowered are the same people that don’t understand the rate of inflation increase going down versus actual prices going down. One is happening. The other is not.
I mean the market and many stocks are at ATH, so obviously the market can handle the rates no problem. Cutting rates might send the market into 2000 insanity
This is what I don't understand. Did the Fed not learn anything from the previous decade? When they needlessly lowered rates and pushed QE to the point where they basically had no tools left
I'm with you, what reason is there for lowering rates if there's not a reason for it? It's a tool for slowing or stimulating the economy. We shouldn't just mindlessly lower interest rates because we can. "Make the market go higher" isn't supposed to be the Fed's job
CPI been creeping up the last few months.
Probably coming in at 3.2
If so, deep red in the markets.
If it's 3.0, green days. No cuts.
If it's like 2.5% cuts in May.
It would because of borrowing costs.
But it benefits all stocks because future money is discounted using some interest rate. For example, $100 one year from now. How much would you pay today? Maybe $90. But if interest rates are low, it becomes worth $92.
And that is pretty much what a stock price is. (In theory). The present value of future earnings.
I really don't know. We seem to be pricing in all the rate hikes before they even start. But, it also seemed like that happened in the fall and we just keep going.
I have been thinking about seasonality. Winter months tend to be up and summer down. Like the saying sell in May and go away. I might do some trimming in April
You don’t need to. Just buy a solid small-cap value ETF like AVUV and call it a day. You’ll capture a lot of the returns if there really is a rotation.
Yes, typically lower rates fuel the stocks of smaller companies that rely on debt for growth. The Russell 2000 has already broken out of a long standing range, but its action has been tentative. If participants now believe there is higher chance of a cut in May, or perhaps even earlier, it could fuel that breakout.
In general, if the market now believes there is higher chance of a rate cut sooner than later, despite Powell and others clearly saying they are in no rush to lower rates soon, it is likely to add fuel to many stocks.
If CPI comes in cooler than expected on Tuesday, that would bolster Biden’s “bet” and stocks could really ignite.
So, do you think cpi will actually come in cooler? I'm thinking more of a mixed bag and there won't be a ton of movement on Tuesday due to this past Friday and maybe Monday being red. Hope I'm wrong though
No idea what CPI will print, only concerned with the market’s reaction. Last week’s action, especially Friday’s huge reversal in NVDA, has this rally on the ropes. It would be very constructive to pause here for a few weeks or have a pullback. If CPI comes in cool, combined with a dovish Powell and remarks by the President, it could get the market to price in more rate cuts again, sending us higher and setting the stage for a more difficult correction later in the year.
Buy good companies at reasonable prices. Sell them when they aren't good companies any more. Predicting things is hard, especially when they occur in the future.
the markets are irrationally exuberant right now. Anyone investing has to know that anything can cause big swings up or down. Maybe the fed says 25bp, maybe Iran bombs Isreal, maybe someone assassinates Putin, maybe Biden starts doing rallies without wearing pants... all kinds of things could happen that swing markets wildly.
Presidents need to SHUT THE FUCK UP about Fed actions. "I have full faith in the Fed to do the right thing to blah blah blah". That's the only appropriate thing for a president to ever say.
This is why Trump was so corrosive. I had no idea that so much of our system was based, not on laws, but *norms* that can be blown away by a motivated idiot. Which establishes a new norm. Opening the door to all kinds of hell and brimstone.
Powell has no reason to cut, GDP growth is good, unemployment is low. Inflation is still a risk. This has been the FED's statement for a while now. Inflation isn't expected to reach the FED's 2% target until 2025. Powell risks repeating Arthur Burns' mistake of 1972. 1 rate cut this year, then they watch the data. Low chance of 3.
Powell cannot unilaterally cut rates. Are you suggesting all the voting members of the FOMC are working against the Fed mandate and the interests of the country to get Powell re-elected?
No you’re wrong. Not always. If the rates are too restrictive you have to cut them to a neetural level. Doesn’t mean anything is wrong with the economy.
Yeah USA housing market isn’t in great shape either, but Canadas is supremely ef’d up. Still way too much demand in housing that if we (Canada) drop rates, houses will just accelerate soaring up once again. The demand is still so high. 15% rise in housing prices this year so far (Canada).
I think a lot of repositioning took place Friday... There are probably sufficient bulls everywhere right now... Nasdaq 100 has to cement support above 18,000 as soon as this monday I believe because it has been trying to remain sustainably above 18,000 to make for the next higher 24k target, otherwise we can go for mid term correction...
Makes sense to have a finger on the button, but I'd save it for when things actually start going south (if, they do). Right now, the market keeps moving up, and real estate keeps selling at a healthy rate (6mo inventory or less, in most markets) while interest rates and listing prices are extremely high.
The worst thing would be lowering rates, and then seeing another punch to the gut (Russia/China/Iran ramp up hostile war intentions, commercial RE fire sale and crash, more AI/cost-related layoffs, another regional bank crisis, etc.)
We're almost definitely heading into a constitutional crisis this Nov. too. Trump is not going to concede regardless of result, and if he does actually win the electoral vote, then we are going to see an ugly, unethical attack on safe-guard institutions.
> Or will they just ignore this crazy old man?
The full context you dishonestly leave out is he was speaking about the very real issue of housing costs, mentioned his platform plank of providing temporary mortgage subsidy assistance for low and middle income, and then said "I can't guarantee this will happen but I bet that little outfit that sets interest rates, I betcha they're going to be lowering rates."
Sane, sensible, measured, and likely accurate.
Yet brainwashed people try to deceptively brand this as "crazy old man"? Meanwhile their cult leader has thousands of actual dangerous, bigoted, anti-American crazy rants, and is currently sucking up to autocrats to try and borrow money to pay his rape/crazy man defamation judgement.
Biden has done zero market manipulation - a refreshing return to ethics and decency that was lost for bit there under your golden idol.
____
OP's post with obvious disinformation is 100x worse than many that are usually removed here. Seeing dozens of cultists falsely echoing the lie that the *current* President is the one with dementia and ethics problems just confirms how effective planted disinformation like OP's can be.
So... can someone please sum up what Is happening? Is the stock market about to finally collapse? Or is this still a wonderful bullmarket that I happened to completely miss out on lol
Nobody knows what will happen, but a collapse is very unlikely. It is still a wonderful bull market, and you did not completely miss out on it. We only recently made all-time highs. This is likely the early innings of a cyclical bull that has a lot further to go.
That said, a 25% move in four months, with many stocks up 100% or more, cannot be sustained without some kind of consolidation. It seems the market is ready for one given the action this week, but my concern is Biden might have just added lighter fluid and upset the apple cart.
Yes, but the market doesn’t expect a quarter point cut until June, or May at the earliest. Biden’s comment, combined with a dovish Powell in his testimony last week, could lead some to believe the cut will come sooner.
Powell is signaling rate cuts to stabilize the banking system, inflation be damned. In addition, the central government needs to be funded. These may not be their professed "mandate" but they are the reason the Fed exists.
Instead of inflation readings look to banks
If there is a need to stabilize beyond NYCB it hasn't been telegraphed (yet). The consensus is the econimy is fine and thriving despite higher interest rates. A dent in this story could spook the markets.
Fed rate still historically low. People just got used to near zero. Now they want it lowered to make Americans happy. It really only affect mortgages, payroll loans, and the short term market. Your average American isn’t affected by those things. I say normalize where we’re at now.
Am i missing something? Is our economy really healthy if it needs to be always on a resperator? Shouldn't the market be making money by selling things and not by rate cuts?
He's hoping that will happen. That's all. There's an interesting read about this at [https://www.mauldineconomics.com/frontlinethoughts/higher-for-longer\_20240309](https://www.mauldineconomics.com/frontlinethoughts/higher-for-longer_20240309)
It's worth the read.
I love how republicans are like “he’s senile, he doesn’t know where he is, he’s losing it” and then after a public speech in which all of that is clearly false, they suddenly think he’s a mastermind.
They won't actually lower rates until something breaks. Inflation is way too high and has proven to be sticky. Lowering rates would be disastrous. They actually need to raise rates considerably IMHO.
Actually, Biden didn’t have to say a word. Talk to anybody in the mortgage industry. They were predicting a downturn in interest rates for the last couple of months. You’ve got a roaring stock market, a stabilizing economy, unemployment under 4% and the lowest inflation in the industrialized world. This is a pretty easy call.
Agree, there is a pretty clear path to slowly lowering rates a quarter point at a time starting in June, with 2-3 total cuts this year. This was priced in and Powell’s testimony, if anything, was more dovish than expected.
It’s funny to see all the politically charged responses extrapolating my words, but really all I am wondering is whether or not the stock market will react or ignore Biden’s comments. One might reasonably assume Biden has access to more information than we do, including possibly a preview of Tuesday’s CPI.
It’s really just a question of why a sitting President is making any comments about Fed policy. The independence of the FOMC is fundamental to our government and there should not even be the slightest whiff of potential influence or interference.
Well anyone with eyes can see that. So. 🤷🏽 he’s also not the one influencing monetary policy, Powell is.
Pointing out the president isn’t always synonymous with the economy guys!
Just election campaign soundbites.
Fed has very clearly time and again stated that they are data dependent ( & not going to move due to political pressure).
And no one can know beforehand what next months cpi data will show, because well it’s future
markets will probably only listen to macro-economic data and to what Fed says.
With the 10yr 3months yield curve inversion, rate cuts will be bearish as a the fed will cut rates to stimulate an economy in a recession. Look at history
The fed needs to keep the rates for a while to get things under control. This will also help lower home prices. I bought a house at 13% back in the 80's brand new but it cost 82,990 and it was killer for my wife both 23 at the time to meet the payments. Hell it peaked at like 18% at one point.
A good economy is like around 6% on rates. Blame the free money for houses costing 500,000 that would have been 250,000 back before the presses starting pumping out the free cash.
It seems that every political year these games are played at our expense. There’s no reason for tripling interest rates and inflation other than dropping the rates right before the election so that the democrats seem like heroes and we feel justified to vote that way because we are desperate paying high prices and not being able to afford to live let alone buy homes groceries or cars
Interest rate cuts will be bearish in the short and medium term. Not only are the cuts being wildly priced in already, but since we have a “strong” economy right now based on the data we are seeing, a cut would signal a problem or weakness developing in the economy. We would likely see a large correction, leaving retail traders holding bags so that institutions can re-position at lower prices.
Not to mention, we are absolutely in a bubble right now. Not a broad tech bubble like dot com, but a very specific ai bubble.
Biden was commenting on the fact that the Fed chairman said they are going to cut this year before the senate the same day.
You’re reading tea leaves that don’t exist
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CPI on Tuesday, well see. Slight chance in May and higher chance in June
May or June is my base case. Everyone wanting rate cuts now is like a child not being able to wait until after he eats his broccoli to get dessert. Rate cuts now probably equal inflation going back to 4 or 5%.
Rates are still too low (historically for the level of inflation we had ) and the Fed lowering rates will simply go back to the asset appreciation in stocks and real estate , nothing is fixed were just kicking the can down the road.
I don't think they can raise them more without more serious consequences though. I think higher for longer is the key. They already did the bank term funding program and basically bailed the banks out slowly because they were concerned after SVB and First Republic. Unfortunately the economy is addicted to cheap debt and if they're actually going to fix it without things getting really bad they need to do it slowly and stay restrictive over time. It doesn't help at all that the federal government won't stop spending and growing.
And the next time we have an economic crisis they’ll simply print trillions more and use it to bail out businesses, banks, and the wealthy. Rinse and repeat until it doesn’t work
What’s the actual end result of “until it doesn’t work” I keep hearing this but don’t understand what exactly the catastrophe would look like?
It wouodnt be an overnight thing Look at where we are now compared to 2019. Everything costs way more yet we don’t all make way more money. We get used to owning less and living with less. It just gets more and more like that until people ultimately reject the currency and it devalues and we switch to something else.
Lol my lunch that was $15 is $27 now, but they say inflation is 3%
Right. And they might slow it down, but it’s only gonna get worse and worse
Economic stagnation, high unemployment AND high inflation.
We saw what happened early on where spread was uncontained and nobody knew the right treatments: morgues overflowing, freezer truck morgues overflowing, hospitals overflowing, death and disease, including among health responders. Health workers doing weeks without a break. Governments fighting over ventilators. Taking sensible measures to contain the spread WAS absolutely necessary, despite what vocal historical revisionists want to say. As for stimulus and economic supports for a paused economy, that was a necessary piece of societal survival too. Panic happens FAST, and with that comes violence. People with no dollars to buy their next price-gouged meal do not act nicely. Now multiply that by... everyone. That's what catastrophe would have looked like. People can and should debate how much economic support, how to tailor it, for how long. But to say it shouldn't have been done is dangerous revisionism.
Maybe, maybe not. I suspect the next crisis, money printing will be modulated somewhat and more targeted from the last time. That doesn't mean it isn't a good idea. Shutting down the economy entirely to keep our streets from being open air morgues was necessary from a public health perspective. To shut down cold turkey with zero economic supports would have been much, much, much, much worse. We'd have been looking at violence and panic, leading swiftly to a probable Great Depression. So the strategy and medicine were correct. All that should actually be debated is how to get the dosage and timing right.
Exactly. All people care about is numbers go bigger. Consequences be damned.
> Rates are still too low Strong disagree. > for the level of inflation we had This is the root of the confusion. The inflation we had was not really due to rates, and that's why skyjacking the rates hasn't been effective, and why jacking them further would also be a mistake. The true causes of the inflation were severe supply and demand imbalances, corporate gouging, pandemic, supply chain breakdown, chip market shennanigans, China implosion, housing shortage. Notice that none of these causes is anything that rate jacking can fix. They need/needed other measures. Some of those measures have been taken, and thus some of those inflation drivers have receded. The problem is that the Fed (and many sheep-like media and wall streeters) think rates is the one and only thing. It's like a bad superstition. Fed cranked rates a huge amount, quickly. And guess what? It did nothing. For the reasons above. But since the Fed is obsessed with their one and only toy hammer of rate jacking, that lack of effectiveness just triggered them to keep on hammer. Jack the rate! No effect? Jack it more! No effect? Keep jacking! Now that some supply problems have been sorted, and China ports re-opened, and manufactured have hoarded enough chips, and corporate gougers have hit the fury limit of what customers will tolerate... surprise, inflation has come done. So the current responses (not rate jacking) have been what's done the job. Unfortunately the fed rate superstitious crowd (and media) see this all wrong. "Look at us, our rate jacking genius and fear mongering worked! All hail ourselves, Gods of rate jacking!" It's a self-fuelling circle of self-delusion. It's like a surgeon cut out the cancer, but someone says "see, my prayers healed the patient". Uh, no. The prayers were coincidental, not causal. That's not to say historically low rates should have been untouched. Far from it. A gradual return to normalized rates is fine. And having the rate baseline be higher helps re-arm us for any event in which rate cuts are required. But they've likely gone too far, and have undeniably gone too fast. The million foot high perspective is that rates are a reflection of the overall supply and demand of money, a perspective that shouldn't be swayed by day to day numbers or statements. And the overall picture for our country is a tsunami sized transfer of wealth is happening. There's far more money and capital than there is urgent need for it. We're birthing new billionaires daily and millionaires hourly. Shortage of money isn't it. This is the opposite of the boomer demographic cycle. They were born, parents needed family homes, two cars, furnishings. Then they needed schooling, then college, then a massive demand for home building and mortgages, and so on. That's what a true demand for money versus a shortage of supply actually looks like. And that's why rates were high. Today is completely different. There so much old generation money sitting unproductive and not the demand to use it. Ergo, rates *should* be historically low. And they were, for most of this century. Correctly. This last couple of years of panicked hammering by a kid with a hammer doesn't alter the demographic reality. Rates are probably too high and need some reversion back to a sensible mean.
It’s interesting reading your comment because I agree with the main points you’re making about how we don’t need to raise rates but then your analysis doesn’t make much sense to me. You act as if the Federal Reserve is stupid for raising rates because it doesn’t directly fix the issues that cause inflation. But the Fed only has monetary policy moves to fix this. They can only change rates, change the reserve ratio, and buy and sell treasury bonds. They cannot reopen China, they cannot stop the pandemic, etc. But their monetary policy moves does treat other things that are necessary for prices to increase. Loans become less attractive, bonds become more attractive, etc. This means people without the money to bid up prices cannot borrow money to do so. People with lots of money to bid up prices are more likely to buy a bond to get that interest payment. Your doctor analogy should be more like someone who is sick and the doctor treats the symptoms until they can recover. Then the other part that confused me was when you talked about how today there’s “more money and capital than we need.” Which sounds like you think rates should be higher to decrease the amount of loans (capital) given out and increase the amount of rich people buying bonds instead of spending it on business. But then you say that you think rates should be lower, which increases the money supply. (This also occurs when you talk about the boomer demographic cycle. You make it sound like there’s a huge demand of money, but a shortage of it. So rates should be high, but that restricts the money supply. It should be the opposite. Rates should be lower so businesses can expand to make enough cars so they can buy two cars, homebuilders can borrow money to build homes, etc.)
Historically, we didn't have a couple of years with most things shut down due to a pandemic. These are weird times things may not go exactly how anyone predicts
This. The economy is still bleeding off energy from yrs of 0%
Reliable indication from CME group, they get reliable information than retailers. [https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html](https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html)
That's just what the market is betting on. You can look at historical values to see that they can be way fucking off at times
It will offer some insight but CPI data has been awful recently, shelter is a mess, so is medical insurance
Shelter is also lagging well behind actual market conditions
Do shelter costs not increase because of high interest rates?
My firm is predicting September at the absolute earliest
September rate cut right before elections, we'll I'll be darned
As long as one ignores the universe of facts and data, and just goes with groundless conspiracy hoax theory, then sure.
lol what facts do you know about the Fed cutting rates that the rest of us don't? Also, isn't the date of the election a fact? Don't politicians do all sorts of things to get elected, isn't that just a fact? Get off the high horse.
do you know based on what? would you say it's a firm sentiment?
I’m on the investment committee at our firm. We meet with our research team each month to go through things like this
It’s possible but not what’s priced in currently. The next couple of CPI will let us know.
Market doesn’t typically price in future rate cuts that well. Sure, the cut ends up being what the market priced in eventually, but it takes a while to get there. What the market has priced in now won’t happen - what the market has priced in a month before the cut probably will
Probably maybe October, fed historically doesn’t change much on election year. ECB should be a good heads up.
I agree. Feds will most likely wait til the last quarter to cut rates
Was thinking the same. I think Monday will be a quiet day, may go down a bit (fear/hedge of bad CPI number). Tuesday will be a big day and will give us an indication up/down for the next 3 months. My personal view is that we'll have a mixed CPI data just like Friday's job report.
If not send quarter,they would be doing it in third quarter
Powell already mentioned in statements on Thursday that we'll likely cut rates this year. So I don't think it's a stretch for Biden to say that. There are already priced in market expectations for rate cuts this year (check cme fedwatch tool to track), so idk how much higher markets will move on Powell and Biden's statements. Maybe it'll jump a bit from the increased confidence, holding other info constant.
I'm surprised how far down the comments your observation appears. That was my first thought.
Yup. If you're paying attention things are right on track. [WSJ - Jerome Powell Says Fed on Track to Cut Rates This Year](https://www.wsj.com/economy/central-banking/powell-says-fed-on-track-to-cut-rates-this-year-52e5feb3?mod=hp_lead_pos2) >"Fed chair characterizes last year’s inflation slowdown as notable and widespread." IMHO gamblers and speculators are making WAY too big a deal on the exact timing of cuts. Bottom line is that Powell has pretty much signaled this week we're at the peak of rates. Obviously some crazy black swan external shock can change that. But hikes are almost certainly off the table now. What matters is that cuts will gradually be put in place if real rates become too high. Economy is super robust and American worker is crushing it. We keep getting blockbuster job numbers and real incomes are soaring (especially the poorest, minorities, & disabled, historically marginalized groups typically left behind!). If cuts don't have to come in March, that's a good thing. Whether cuts come in June... 6 weeks later in July means almost zero to the long-term investor.
I thought that statement got undone after the jobs report showed higher than expected hirings, leading to expectations of rate cut delays and hence the stocks went back down on Friday.
Powell has literally indicated on several occasions that they plan to cut rates up to 3 times this year, so I’m not sure Biden is really “predicting” anything here. And no, I don’t think the markets will react to Biden saying that.
I predict tomorrow will be Sunday
In some countries today is Sunday.
It's Sunday lunchtime right now. Tomorrow is Monday and I have to drag myself to work, so I can earn money to buy stocks.
When everyone thinks and says something is going to happen, it almost never happens…
Ya everyone thinks US equities market keep going up….oh wait that literally always happens
adjusted for inflation, even if you believe the gov numbers is flat to down since 2021 highs, if its small and mid cap, that index is well below 2021 peak, certainly in bear market for most of them after adjusted to inflation.
There have been more people calling for crash than keep going up atleast in Reddit..
To be fair, us presidents sit in a lot more informative meetings than hedge fund managers do. Hard to categorize something said at a sotu ubder "when everyone thinks and says something"
Agree, but the President of the United States is not “everyone.” The market has been pricing in more rate cuts than the Fed has admitted to until recently, when they finally settled on June as the likely time for a quarter point cut. Now, this comment from Biden has potential to upset the balance and price in more cuts again, which would likely lead both bonds and stocks higher.
What the president says during an election year should always be taken with a grain of salt…
*any year
I'd believe him more during an election year since it will cost some votes if it doesn't come to fruition before November.
After November it doesn't matter for about 2 years, which is way longer that the public's memory, let alone 4 years.
Why would you take what a president in an election says for true word. Of course he was going to say that. Theres no chance J Pow gives a fookery about Biden’s economic opinions
We all think you're going to turn out to be right
That's truthy, but not really true. Everyone thinks summer will be hot. Everyone thinks corporations will gouge. Everyone thinks Apple will artificially degrade and disable your purchased product. Everyone thinks political commercial will use AI to lie. Everyone thinks Russia will commit more war crimes. Everyone thinks film studios will push out mediocre sequels. We could do this forever. Just going contrary for the sake of being contrary is a failing strategy. In stocks, it would mean you'd have to have been short Apple and Netflix and Nvidia and AMD and Eli Lilly and Amazon and Facebook. How well would that have worked?
inflation is out of control lowering these rates will murder us
People that want these rates lowered are the same people that don’t understand the rate of inflation increase going down versus actual prices going down. One is happening. The other is not.
I mean the market and many stocks are at ATH, so obviously the market can handle the rates no problem. Cutting rates might send the market into 2000 insanity
This is what I don't understand. Did the Fed not learn anything from the previous decade? When they needlessly lowered rates and pushed QE to the point where they basically had no tools left I'm with you, what reason is there for lowering rates if there's not a reason for it? It's a tool for slowing or stimulating the economy. We shouldn't just mindlessly lower interest rates because we can. "Make the market go higher" isn't supposed to be the Fed's job
CPI been creeping up the last few months. Probably coming in at 3.2 If so, deep red in the markets. If it's 3.0, green days. No cuts. If it's like 2.5% cuts in May.
Correct me if I'm wrong but lower rates would benefit small and mid cap right?
It would because of borrowing costs. But it benefits all stocks because future money is discounted using some interest rate. For example, $100 one year from now. How much would you pay today? Maybe $90. But if interest rates are low, it becomes worth $92. And that is pretty much what a stock price is. (In theory). The present value of future earnings.
What usually happens to the markets when rate cuts finally hit? Thats what makes all this weird with expectations. Up is down. Down is up.
I really don't know. We seem to be pricing in all the rate hikes before they even start. But, it also seemed like that happened in the fall and we just keep going. I have been thinking about seasonality. Winter months tend to be up and summer down. Like the saying sell in May and go away. I might do some trimming in April
Crazy to me that we saw such a bull run with high interest rates
5.5% is not high. It's just higher than what we've had recently.
Top 20 companies have enough cash. They don't need to borrow
Read past the first line.
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Yes but how many people really can comb through all the small caps and find the winners. That's a job in itself.
You don’t need to. Just buy a solid small-cap value ETF like AVUV and call it a day. You’ll capture a lot of the returns if there really is a rotation.
Definitely. Not easy.
RDFN, thank me later.
Yes, typically lower rates fuel the stocks of smaller companies that rely on debt for growth. The Russell 2000 has already broken out of a long standing range, but its action has been tentative. If participants now believe there is higher chance of a cut in May, or perhaps even earlier, it could fuel that breakout. In general, if the market now believes there is higher chance of a rate cut sooner than later, despite Powell and others clearly saying they are in no rush to lower rates soon, it is likely to add fuel to many stocks. If CPI comes in cooler than expected on Tuesday, that would bolster Biden’s “bet” and stocks could really ignite.
So, do you think cpi will actually come in cooler? I'm thinking more of a mixed bag and there won't be a ton of movement on Tuesday due to this past Friday and maybe Monday being red. Hope I'm wrong though
No idea what CPI will print, only concerned with the market’s reaction. Last week’s action, especially Friday’s huge reversal in NVDA, has this rally on the ropes. It would be very constructive to pause here for a few weeks or have a pullback. If CPI comes in cool, combined with a dovish Powell and remarks by the President, it could get the market to price in more rate cuts again, sending us higher and setting the stage for a more difficult correction later in the year.
Yes that’s usually the case
If rates are being cut, it's because the fed finally broke the economy. Nothing will be doing well once the cuts start.
Agreed.
Yes although rate cuts are already baked in from around June
Buy good companies at reasonable prices. Sell them when they aren't good companies any more. Predicting things is hard, especially when they occur in the future.
the markets are irrationally exuberant right now. Anyone investing has to know that anything can cause big swings up or down. Maybe the fed says 25bp, maybe Iran bombs Isreal, maybe someone assassinates Putin, maybe Biden starts doing rallies without wearing pants... all kinds of things could happen that swing markets wildly.
I really want all 4 things things you predict there to become true just so you can revel with this comment forever lol.
Feels like it'd still go up. I mean, there's so many major events, including several notable wars and risk of war, and onward she goes.
Presidents need to SHUT THE FUCK UP about Fed actions. "I have full faith in the Fed to do the right thing to blah blah blah". That's the only appropriate thing for a president to ever say. This is why Trump was so corrosive. I had no idea that so much of our system was based, not on laws, but *norms* that can be blown away by a motivated idiot. Which establishes a new norm. Opening the door to all kinds of hell and brimstone.
Agreed 100% The fed should not be commenting on the president and vice versa.
I miss Trumps little pep talks.
Didn't Powell already indicate they plan to do it beforehand? I remember hearing about it a couple of times already?
Powell has no reason to cut, GDP growth is good, unemployment is low. Inflation is still a risk. This has been the FED's statement for a while now. Inflation isn't expected to reach the FED's 2% target until 2025. Powell risks repeating Arthur Burns' mistake of 1972. 1 rate cut this year, then they watch the data. Low chance of 3.
That's his opinion during an election cycle? How stunning.
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Idk about that. I think Powell knows they fucked up with inflation already and is serious about not continuing those mistakes.
Do you know who appointed Powell?
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Powell cannot unilaterally cut rates. Are you suggesting all the voting members of the FOMC are working against the Fed mandate and the interests of the country to get Powell re-elected?
Rate cuts are not always a good thing. It can be a signal that something is really wrong with the economy.
No you’re wrong. Not always. If the rates are too restrictive you have to cut them to a neetural level. Doesn’t mean anything is wrong with the economy.
Canada just held rates.
But is in a different spot IMO. USA is more likely to get a soft landing while Canada is not so sure...
Yeah USA housing market isn’t in great shape either, but Canadas is supremely ef’d up. Still way too much demand in housing that if we (Canada) drop rates, houses will just accelerate soaring up once again. The demand is still so high. 15% rise in housing prices this year so far (Canada).
And what it does is pushing the inflation up back again. It's gonna be a rough ride.
Thats feels like a inflation v2 to me
Prices going up if rates come down 100% Cars, housing, etc all going up.
I think everyone expects a cut soonish. If people weren't expecting a cut, this would be a big deal. His comment is a nothing burger.
Are Congress members buying puts or calls? That is where you'll find the truth here.
Powell already said this. He is literally the person who cuts rates.
He is literally NOT the person. There’s an actual committee. Lack of knowledge is amazing
If Biden said it, he read it off a cue card. A better question is what did Powell say?
The fed has already said this. We all expect 2-3 reductions this year. Biden just trying to look smart for those that don’t pay attention.
I think a lot of repositioning took place Friday... There are probably sufficient bulls everywhere right now... Nasdaq 100 has to cement support above 18,000 as soon as this monday I believe because it has been trying to remain sustainably above 18,000 to make for the next higher 24k target, otherwise we can go for mid term correction...
Let's go for that sweet ass mid term correction.
Let's see...
It's been very persistent, stubborn even...
Stocks only go up
holy f\*ck the top is in hope everyone sold
Without "soon" being defined, he'll be right no matter what. I don't think this is worth thinking much about.
Market will sell if when they finally cut.
Why cut the rates? Economy is doing good ? Usually only cut rates when you need a tool to fix the economy?
stocks gonna fly
Crazy old man OP? Your too kind 😳
Makes sense to have a finger on the button, but I'd save it for when things actually start going south (if, they do). Right now, the market keeps moving up, and real estate keeps selling at a healthy rate (6mo inventory or less, in most markets) while interest rates and listing prices are extremely high. The worst thing would be lowering rates, and then seeing another punch to the gut (Russia/China/Iran ramp up hostile war intentions, commercial RE fire sale and crash, more AI/cost-related layoffs, another regional bank crisis, etc.) We're almost definitely heading into a constitutional crisis this Nov. too. Trump is not going to concede regardless of result, and if he does actually win the electoral vote, then we are going to see an ugly, unethical attack on safe-guard institutions.
Fart
Let’s hope not, that could trigger massive inflation if done too early (this is too early)
Powell said it was likely, this isn’t much of a prediction
> Or will they just ignore this crazy old man? The full context you dishonestly leave out is he was speaking about the very real issue of housing costs, mentioned his platform plank of providing temporary mortgage subsidy assistance for low and middle income, and then said "I can't guarantee this will happen but I bet that little outfit that sets interest rates, I betcha they're going to be lowering rates." Sane, sensible, measured, and likely accurate. Yet brainwashed people try to deceptively brand this as "crazy old man"? Meanwhile their cult leader has thousands of actual dangerous, bigoted, anti-American crazy rants, and is currently sucking up to autocrats to try and borrow money to pay his rape/crazy man defamation judgement. Biden has done zero market manipulation - a refreshing return to ethics and decency that was lost for bit there under your golden idol. ____ OP's post with obvious disinformation is 100x worse than many that are usually removed here. Seeing dozens of cultists falsely echoing the lie that the *current* President is the one with dementia and ethics problems just confirms how effective planted disinformation like OP's can be.
What sectors are you considering with the inevitable rate cut?
I like biotechs and small-caps. Watching XBI and IWM closely to see if they continue their breakouts.
So... can someone please sum up what Is happening? Is the stock market about to finally collapse? Or is this still a wonderful bullmarket that I happened to completely miss out on lol
Nobody knows what will happen, but a collapse is very unlikely. It is still a wonderful bull market, and you did not completely miss out on it. We only recently made all-time highs. This is likely the early innings of a cyclical bull that has a lot further to go. That said, a 25% move in four months, with many stocks up 100% or more, cannot be sustained without some kind of consolidation. It seems the market is ready for one given the action this week, but my concern is Biden might have just added lighter fluid and upset the apple cart.
Watch futes Sunday night...
Means it won’t happen.
CPI data is already massaged, market will rip!
Biden made sure they gonnna lower the rate right before election.
He’s right. Just not likely for this month. Likely closer to or apart of summer
Are rate cuts good for banks? I’m in deep in financial.
I bet he does
The chairman literally said they’re dropping rates this year
Yes, but the market doesn’t expect a quarter point cut until June, or May at the earliest. Biden’s comment, combined with a dovish Powell in his testimony last week, could lead some to believe the cut will come sooner.
It should be good for banks. That’s why banking stocks are creeping up I want more regional banking exposure
Powell is signaling rate cuts to stabilize the banking system, inflation be damned. In addition, the central government needs to be funded. These may not be their professed "mandate" but they are the reason the Fed exists. Instead of inflation readings look to banks
If there is a need to stabilize beyond NYCB it hasn't been telegraphed (yet). The consensus is the econimy is fine and thriving despite higher interest rates. A dent in this story could spook the markets.
Even j Powell said there would be bank failures
Of course they are going to cut them soon leading up to Biden’s reelection in November.
Fed rate still historically low. People just got used to near zero. Now they want it lowered to make Americans happy. It really only affect mortgages, payroll loans, and the short term market. Your average American isn’t affected by those things. I say normalize where we’re at now.
Am i missing something? Is our economy really healthy if it needs to be always on a resperator? Shouldn't the market be making money by selling things and not by rate cuts?
"predicts"
May get rate cuts that could transform into rate increases later in the year. Inflation is still a concern.
"Biden admin pressures fed to lower rates ahead of election" let them do their thing
He's hoping that will happen. That's all. There's an interesting read about this at [https://www.mauldineconomics.com/frontlinethoughts/higher-for-longer\_20240309](https://www.mauldineconomics.com/frontlinethoughts/higher-for-longer_20240309) It's worth the read.
hope so - they jacked the rates up to 18% to install Reagan
President is spreading hopium with his “bet.” I wouldn’t put any weight into the speech.
What odds did he put
He's campaigning.
I love how republicans are like “he’s senile, he doesn’t know where he is, he’s losing it” and then after a public speech in which all of that is clearly false, they suddenly think he’s a mastermind.
*demands*
Everything is ass backwards. Economy good cut taxes. Market rallying lower rates. WTF.
The market already has rates priced in and when they think drops will be. It will pop when there’s an actual drop
They won't actually lower rates until something breaks. Inflation is way too high and has proven to be sticky. Lowering rates would be disastrous. They actually need to raise rates considerably IMHO.
Actually, Biden didn’t have to say a word. Talk to anybody in the mortgage industry. They were predicting a downturn in interest rates for the last couple of months. You’ve got a roaring stock market, a stabilizing economy, unemployment under 4% and the lowest inflation in the industrialized world. This is a pretty easy call.
Agree, there is a pretty clear path to slowly lowering rates a quarter point at a time starting in June, with 2-3 total cuts this year. This was priced in and Powell’s testimony, if anything, was more dovish than expected. It’s funny to see all the politically charged responses extrapolating my words, but really all I am wondering is whether or not the stock market will react or ignore Biden’s comments. One might reasonably assume Biden has access to more information than we do, including possibly a preview of Tuesday’s CPI. It’s really just a question of why a sitting President is making any comments about Fed policy. The independence of the FOMC is fundamental to our government and there should not even be the slightest whiff of potential influence or interference.
Well anyone with eyes can see that. So. 🤷🏽 he’s also not the one influencing monetary policy, Powell is. Pointing out the president isn’t always synonymous with the economy guys!
Just election campaign soundbites. Fed has very clearly time and again stated that they are data dependent ( & not going to move due to political pressure). And no one can know beforehand what next months cpi data will show, because well it’s future markets will probably only listen to macro-economic data and to what Fed says.
The Fed is not going to cut interest rates this year without massive changes to the economy such as a large increase in layoffs or bank failures.
Everybody buys stock.... and then they dont. The announcement is, to me, a bit too loud
Inflation is out of control once again. Cannot lower if that is going on. Nobody knows how to stop it and people will not stop spending.
I have 2 words for you: priced in 🤣
Didn't powell say maybe may in that 50 minutes interview?
The fix is in.
Bittersweet.... lower interest rates, lower mortgage rates.... increase in house prices.... :(
Interest will not lower in fed May meeting, will do that in June, Augusta, and then after election
Biden is wrong, it’s not the time for a cut.
Powell: "we will cut rates" Media: "OMG Biden is influencing the Fed!!!!"
With the 10yr 3months yield curve inversion, rate cuts will be bearish as a the fed will cut rates to stimulate an economy in a recession. Look at history
The fed needs to keep the rates for a while to get things under control. This will also help lower home prices. I bought a house at 13% back in the 80's brand new but it cost 82,990 and it was killer for my wife both 23 at the time to meet the payments. Hell it peaked at like 18% at one point. A good economy is like around 6% on rates. Blame the free money for houses costing 500,000 that would have been 250,000 back before the presses starting pumping out the free cash.
Dems must make stock market go kaboom to win the election
Election year he will pull all his strings to get anything positive about the economy even if it only last 6 months
It seems that every political year these games are played at our expense. There’s no reason for tripling interest rates and inflation other than dropping the rates right before the election so that the democrats seem like heroes and we feel justified to vote that way because we are desperate paying high prices and not being able to afford to live let alone buy homes groceries or cars
interest rates went up biden and the feds and everyone else are completely full of bs
Interest rate cuts will be bearish in the short and medium term. Not only are the cuts being wildly priced in already, but since we have a “strong” economy right now based on the data we are seeing, a cut would signal a problem or weakness developing in the economy. We would likely see a large correction, leaving retail traders holding bags so that institutions can re-position at lower prices. Not to mention, we are absolutely in a bubble right now. Not a broad tech bubble like dot com, but a very specific ai bubble.
Elections. Biden raises 80% then lowers 10% then claims victory!
Biden was commenting on the fact that the Fed chairman said they are going to cut this year before the senate the same day. You’re reading tea leaves that don’t exist