Sure cause this time for the first time in 20 years the federal reserve is actually going to do what they say...not.
We'll be back to zero and negative is coming folks.
We'll be back to zero and negative is coming folks.
This is what the stock market is betting, and being continuously disappointed, on. It’s a hell of a bet, and I think it’s dead wrong.
Yes, when rates are cut valuations go up. This is finance 101.
American stocks are rich because a recession and low rates are priced in. If that doesn’t happen, if rates go where the Fed forecasts, the market needs to drop.
You’re in good company, by the way. Prominent managers are long equities and quality credit [1] on the hypothesis that rate cuts will keep valuations buoyed. (It’s also why the curve is inverted [2].) This is the dominant financial debate du jour. The market (specifically: professional money managers) are fighting the Fed. (My belief is this is more tied to fees and AUM than a fundamental read on the economy.)
[1] https://www.ft.com/content/e3d5ee33-5cc6-4be5-bf68-fcd92a75b...
[2] https://www.bloomberg.com/news/articles/2023-02-09/treasury-...
I'm asking because I used to read the FT on and off for 15 years going on 20 now, but the last couple of years have been really dire in terms of their biases and their lack of impartiality (especially in the politics and the international sections). At the same time your links made me miss their finance pieces, which I agree most of the times might have looked very "dry" but for a person outside finance (like I am) they were illuminating nonetheless. I'd go back to reading the FT again just for those.
Most British coverage of American politics is abysmal. For international, the FT has biases, but they tend to get the facts straight. (Definitely Eurocentric.)
The market has been undershooting the whole time the fed has been raising rates. It’s a little strange frankly.
5% and 0% are already world apart given the last two decades.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...
Or do you(and they) think a recession is coming, and that in turn will drive rates down?
It's hard to me to imagine it all, with inflation having been so bad the last two years. But I'm not versed enough I feel to propose any kind of argument either way.
The rates will come down at first because inflation has been beat. Then it will come down more when it becomes clear that the fed screwed up both ways and now has to try to fix the economy.
Then the consumer will stop buying things because prices are going the other way fast. AKA a deflationary bust which can be much worse than anything we have seen in our lifetimes.
It will be the single biggest fight ever of every central bank to stop the death spiral that shows up on the back of their forced recession in the name of fighting inflation.
They will go negative and QE much larger than pandemic.
If you think these morons can't cause a bust much worse than 2008 then pray to god Siegel is wrong for once.
https://fred.stlouisfed.org/series/fedfunds
The latter half of the 90s was >5%.
The idea that inflation and unemployment move inversely and (broadly speaking) represent a policy trade-off is literally the first chapter of Macro 101. With all respect, I see it as very difficult to discuss economics on any serious level with someone who is not aware of this notion, or who believes the opposite is true (as opposed to someone who has a critique or a nuanced view of it).
1) Inflation (high, not the good kind of 2%) hurts the poor more than the rich https://www.dallasfed.org/research/economics/2023/0110#:~:te....
2) To tame high inflation central banks need to raise interest rates, thus creating unemployment and economic slowdown in general https://rsmus.com/insights/economics/how-high-must-unemploym.... That's also much worse for the poor than the rich (who can afford not to work a few years without being thrown to the streets)
But honestly, you're right, we are talking past each other here there is nothing to be gained.
What?