The Fed’s terminal interest rate futures are higher than a week ago. Not only that, the speed of interest rate cut expectations has also been delayed by almost three months compared to the previous week. It fell back to 4.5%, but this expectation has been delayed, and it will not be seen until March 2024.
I remember that I shared my views on inflation in the United States and other mature economies last year. For all mature economies whose inflation once exceeded 5%, it is a very difficult and unbearable path for inflation to return to 2%. This process includes rising unemployment, falling wages, weak or even losses in corporate profits, and a decline in the new order index.
But so far, I don't think the situation is as expected by the Fed or the market. Although the data I have seen for the time being is somewhat mixed, I haven't seen a signal that the Fed needs to cut interest rates first. Imagination is much longer, and don’t forget that the Fed is always half a beat or even a beat behind the economic data. Maybe the data will really weaken by then, but the Fed officials choose not to believe it, and continue to observe. The market does not believe it. It takes time to ferment the decision-making, and as a result, more potential risks that were not necessary to bear will be exposed one by one.
At that time, I think the current market rebound may also come to an end, especially if the market finds out that it is mispriced, then it may be even more powerful if it has risen so high before.
Comments