Could the NASDAQ re-test the COVID lows of March 2020 when it sat around 6,900? Yes. That would require a prolonged recession (which we expect) AND The Fed not restarting its ultra-dovish monetary policy of Quantitative Easing combined with a near zero Fed Funds Rate. Who knows how the Fed will behave in 2H 2023 … Continue reading The NASDAQ Could Re-Test COVID Lows & The Rise of High Yield
Tag: fed funds rate
We had a saying on the sell-side to describe companies that would continually lower guidance each quarter rather than get all of the dirt out in the wash at once (this was pre-2005 before companies mastered the art of guidance). The Federal Reserve did not get the memo. The Fed raised its policy rate by … Continue reading The Fed: Death By A Thousand Cuts
If the Fed raises by 100 BPS tomorrow we believe there is another 10% downside to the NASDAQ before October earnings. We believe the NASDAQ will continue to work lower as the Fed hikes its Fed Funds Rate and as Treasury yields climb. We expect the Fed's rate hiking will stop by early next year … Continue reading A NASDAQ Bottom. QT Or Not To QT?
We have frequently written over the past few weeks that the Fed ought to increase its Fed Funds Target Range by 100 BPS to 3.25-3.50% on Wednesday at 2:00pm during its FOMC meeting. The 2-Year Treasury yield (a Fed barometer) sits at 3.95% and the Fed ought to be a fast follower of the 2-Year … Continue reading We Prefer QT To Fed Funds Hikes
We have updated our Fed Funds Rate increase probabilities from our previous note on September 5th: 100 BPS increase: New probability: 75%; Old probability: 50%;75 BPS increase: New probability: 25%; Old probability: 40%;50 BPS increase: New probability: 0%; Old probability: 10%. The FOMC meets on September 20th and 21st.
August Core CPI was 6.30%, ahead of the Cleveland Fed's 6.25% estimate (table below), and up from July's 5.90% print. Headline CPI was 8.30%, down from July's 8.50% print given oil's retreat, but ahead of the Cleveland Fed's 8.24% estimate. Our view is that with Core CPI at 6.30%, the Fed will likely raise by … Continue reading Core CPI Runs Hot. Yields To Move Higher.
Today's chart represents the difference between the Fed Funds Rate less the year-over-year change in the CPI plotted monthly. The difference between the Fed Funds Rate and the year-over-year change in the CPI is almost as negative (and therefore accommodative) as it has ever been. The Fed has its work cut out in its battle … Continue reading Fed Funds Rate – CPI = Accommodative Policy
The Fed will look to Core CPI next week - not the Headline CPI number - to assess the level of its next rate tightening move. We have advocated for a 100 BPS increase should Core CPI grow versus last month as the Fed Funds Rate remains accommodative and the markets need to be shocked … Continue reading Forget Headline CPI. Focus On Core.
Despite hawkish rhetoric the Federal Reserve's monetary policy remains accommodative. Real interest rates remain negative by a wide margin (8.50% CPI compared to a 2.25-2.50% Fed Funds Rate range) and we are nowhere near a "neutral" rate. Our outlook calls for muted Real GDP growth and high prices (i.e. Stagflation) for years to come. Commodities … Continue reading The Fed Remains Accommodative. Inflation Remains Persistent.
We believe there is a 50% probability that the Fed will raise its Fed Funds target range by 100 basis points when the FOMC meets on September 20th and 21st. 50% probability of a 100 basis point increase, 40% probability of a 75 basis point increase, 10% probability of a 50 basis point increase. July … Continue reading 50 vs. 75 vs. 100 BPS