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Stocks’ Interpretation Of Rate Cut Pricing May Lack Nuance
Stocks' interpretation of market pricing for Fed cuts in 2024 may lack sufficient nuance.
That was the message from one of the Street's most recognizable equities strategists on Tuesday.
When we talk about what's "priced in" in terms of the rates trajectory, we often (in some sense because clarity and brevity demands it) put "too much weight [on] the aggregate pricing as opposed to thinking about the underlying set of probabilistic outcomes," as Morgan Stanley's Mike Wilson put it.
In short,
Yes equities are right now just a derivative of the rates trade, at least at the index level. I realize it has happened before for periods of time but I can’t recall an instance when it felt like everything was one big trade for so long.