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Market-implied expectations for Fed fee cuts — which have collapsed previously two weeks — declined additional this week after Chair Jerome Powell signaled policymakers will wait longer than beforehand anticipated to ease coverage.
An preliminary quarter-point discount stays priced in for November.
The Fed might not minimize rates of interest in any respect this yr with inflation remaining excessive, stated JPMorgan Chase & Co. President Daniel Pinto.
“It might take a bit longer till they’ll minimize charges,” Pinto stated at a Semafor occasion in Washington, including that the chance of a fee hike is “very, very low” amid widespread skepticism that inflation will ease any time quickly.
The Fed isn’t in any hurry, as a fee minimize that comes too early can be “painful” and possibly trigger a recession, he stated.
The market’s greatest fear proper now’s inflation, which is re-accelerating and throwing chilly water on the thought of any fee cuts in 2024, not to mention one or two, in accordance with Michael Landsberg, chief funding officer at Landsberg Bennett Personal Wealth Administration.
“We’re firmly within the camp of no fee cuts in 2024,” he stated. “We imagine buyers ought to put together for the next for longer regime with regards to each inflation and rates of interest and that funding portfolios ought to be positioned for these dynamics for the foreseeable future.”
“With fee cuts delayed, reasonably than canceled, in our view, we nonetheless anticipate the yield on the 10-year U.S. Treasury to finish the yr round 3.85%, stated Mark Haefele at UBS International Wealth Administration. “As soon as the Fed begins slicing charges this yr, the bond market will possible proceed to cost a sequence of additional cuts into 2025 and past.”
Whereas timing the market is difficult, buyers can extra confidently add period publicity, in accordance with Financial institution of America Corp. strategists led by Mark Cabana, who advocate “going lengthy” five-year Treasurys.
The commerce is supported by “Fed unlikely to hike, danger asset sensitivity to charges and cleaner period positioning,” they famous.
(Picture: Adobe Inventory)
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