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Why Stocks No Longer Care How Many Times The Fed Cuts Rates
Of all the purportedly puzzling dynamics bedeviling market participants in their belabored efforts to makes sense of things in 2024, the most vexing may well be the decoupling of equities and rate-cut pricing.
I've obviously spent quite a lot of time on the subject in recent weeks. Like this year's other key macro/market debates, there are a couple of "easy" explanations which'll work if you're not especially interested in the nuance. But most readers are interested in the nuance. Otherwise you
Two articles in today’s WSJ suggest that the Fed is doing a fine job: both Dollar Tree and McDonald’s speaking about decreased spending by lower income consumers. All the while, corporate earnings and share prices relentlessly rise.
It’s a Capitalist Nirvana!
An added plus is that it will help Trump win in November.
All is well.
Meanwhile, WSM’s higher-income customers are still spending enough on full-price furniture, decor, and cookware to support record margins and FCF and gradually improving (less worse) sales trends (and some singed shorts).
The wealth effect, indeed.
Well said John !!
The Fed is taking care of folks in the top 10%. The rest of you can buy now, pay later. All is well.
https://finance.yahoo.com/news/american-debt-stings-never-era-110029834.html
Thanks for the link Derek. Sigh.
Are we looking at the reverse version of trickle-down economics? If the bottom 10% of the economic ladder are more susceptible to higher interest rates (due to their exposure to credit card debt and rent hikes for example), then the “higher for longer” squeeze on them could conceivably lower inflation without hurting the top 10% (who are getting more interest on their cash). If the poor (who don’t own stocks) bear the bulk of the burden of fighting inflation, that frees up Main Street to go about business as usual.