Fed Preaches Caution. Stocks No Longer Care
It's fairly obvious by now that equities are unbothered and otherwise nonplussed by the notion that the Fed means it when officials contend that barring a significant deterioration in the labor market, the base case for rate cuts in 2024 is three.
Coming into the year -- which is to say coming out of a November-December risk rally predicated almost entirely on escalating rate-cut bets and falling bond yields -- the big question was whether stocks could hold up in the event market pricing for Fe
Interest rates don’t seem to be such a good policy lever anymore as well. Except to stifle multi-family home building, which does not push existing home prices lower.
Maybe we are waking up to the realization that options and algo-driven traders now matter more than plain vanilla “investors” do.
Perhaps equities are starting to weight-reflect other data in addition to rates trajectory. For the most part since late October it has all been a big rates trade, but the recent decoupling might hint at some optimism that earnings growth will catch up to multiple expansion aided by the resilient US economy and the forever promised liquidity out of China, plus AI giving birth to a new productivity boom, stranger things have happened.