Inflation Volatility Unlikely to Disappear

Market is Pricing in Six Rates Cuts in 2024   Currently, Fed Funds traders are pricing in six cuts (shown below in orange) by the end of 2024. Keep in mind that the Fed projected just three cuts in its latest Summary of Economic Projections (shown below in blue)....

December CPI: Shelter Prices Still the Driver

The U.S. Headline CPI for December rose +0.3% m/m (3.4% y/y) and the core CPI (ex: food & energy) was +0.3% m/m (3.9% y/y).   Source: BLS/Stifel as of 01.11.2024   Inflation came in slightly above expectations in December. Core inflation is being aided by...

Assessing the Historic Bond Rally

Biggest Two-Month Rally in 40 Years Optimistic inflation data, and a Fed in the driver’s seat, have investors pricing in ~6 rate cuts in 2024.   Source: Bianco as of 12.31.2023   While 6 cuts sound optimistic, based on history it’s not outlandish....

Will the Dovish Pivot Stick?

The shift in expectations for future interest rates has become the top narrative of markets. Following last week’s FOMC meeting, markets were thrilled to see the Fed add rate cuts to their Dot plot (SEP Projections) and talk about the potential for rate cuts....

December FOMC Update

As expected, the Fed left its target rate unchanged at 5.25% – 5.50%, matching market consensus.  The updated rate forecast, or dot plot, doesn’t have another rate hike penciled in next year.   Source: Bianco/Fed as of 12.14.2023   In addition, expectations...

Update on Rate Cut Expectations

Fed expectations moved drastically last week. On Friday, November 24, markets were pricing in three cuts in 2024, with the first in June (orange). By Friday, December 1, the market was pricing in five cuts in 2024, starting around April (blue).   Source: Bianco...