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 Fed easing receded.

At the extremes, that pricing suggested cumulative rate cuts of 175bps this year. The juxtaposition with the 75bps tipped by the December dot plot was stark: A convergence that saw market pricing catch down to the Fed’s “median” case would entail 100bps of de facto tightening. Surely that’d spell a significant de-rating.

Alas (for bears), things haven’t panned out that way. Not yet. The simple (and in some sense stylized) figure below gives you an idea of the extent to which equities have decoupled from rate-cut speculation.

To be sure, market pricing’s still indicative of more easing than the last dot plot, but when you consider what that pricing actually reflects (i.e., the constellation of prospective macro-policy permutations and the odds traders assign to them), it’s fair to suggest the (rates) market’s “base case” is now somewhere close to the Fed’s.

Think about it this way: The amount of “extra” cut premium above and beyond 75bps reflects i) traders’ assessment of the Fed’s fortitude, ii) the ebb and flow of the incoming macro data and, implicitly, iii) the odds traders give to various tail risks.

It’s important to note that market pricing also reflects traders’ perceptions of the interplay between those factors. So, for example, midway through last week, the market had to assess what Jerome Powell’s apparent willingness to hold terminal at least until May might mean in the context of renewed regional banking turmoil. The read-through was that the odds of a hard landing had increased, so although March rate-cut odds obviously receded, aggregate rate-cut pricing for 2024 increased to account for the perception that between CRE risk and a behind-the-curve Fed, the chances of a hard landing moved materially higher in the space of just 48 hours.

Fast forward a few days and the jobs report, in conjunction with a robust read on services sector activity, made it clear that irrespective of what’s happening on regional bank balance sheets, the economy’s doing fine. The odds of a hard landing thus receded, and when coupled with obstinate Fed rhetoric, the read-through was virtually no chance of a March cut and less aggregate easing for the full year.

What’s currently in the price, as of Wednesday, is 75bps plus what I think it’s fair to describe as a reasonable margin (i.e., a couple of cuts worth of premium) to account for lingering hard landing risk.

Equities have just stopped caring. And although I’m personally becoming a bit circumspect (see “Don’t Look Down” for more on that) I can’t say I blame stocks for tuning out the rates show, if that’s what equities are doing. Rates and bonds are a silly soap opera at this juncture, and while I’d be inclined to trust market pricing more than Fed officials when it comes to the likely trajectory of policy going forward, it’s worth recalling that markets consistently underestimated the Fed this cycle.

The figure above, from BofA’s derivatives strategy team, illustrates a market that never really caught up.

On Wednesday, the message from Fed officials was unanimous: Rate cuts aren’t imminent. “At some point, the continued cooling of inflation and labor markets may make it appropriate to reduce” rates, Adriana Kugler said, at a Brookings event. “It will likely become appropriate to begin easing policy restraint later this year,” Susan Collins remarked, in Boston. “At some point.” “Later this year.” Not March.

Neel Kashkari, who grabbed headlines earlier this week after publishing an essay which speculated about a higher neutral rate, was on CNBC today. He sees “two or three cuts” this year. Not five, let alone six or seven.

You get the point. March is a non-starter. And the Fed’s not bluffing about being cautious and deliberate when it comes to rate cuts in 2024. But, again, it just doesn’t seem to matter for equities. The MSCI World Index hit a new record high on Wednesday.