To The Moon

An interest-rate cut at the Federal Reserve's June meeting, though now widely expected, should not be viewed as decision that has already been made, Fed watchers say.

When Fed Chair Jerome Powell's press conference ended last Wednesday, expectations that the Fed would cut rates in June shot higher, ending the week at a 67% chance in futures markets, up from just above 50% earlier in the week, according to the CME Group.

But economists think the bond market is getting ahead of itself. "The bond market has expected them to move a little early the whole time. 

I wouldn't be surprised if they wait one more meeting [until July]," said Ethan Harris, retired chief global economist at Bank of America.

The January and February consumer inflation readings were "two bad months," and they need THREE friendly reports before they're ready to pull the trigger. "That may not be in time for June," Harris said. "So I think that's where the debate should be. June or not," he said in an interview. And how will the market react should further data show that we are not ready for the first rate cut in June. 

Would we get a soft landing? Or a massive sell-off, given the rapid upside in stocks of late? J. Benson Durham, head of global policy and asset allocation at Piper Sandler, agreed. "I think it is too soon the say that June is locked in and baked in the cake," Durham said in an interview. 

"I still think the data is kind of volatile." Uncertainty about the economic outlook is higher than it's been since the 1970s, Durham said.

Derek Tang, economist at Monetary Policy Analytics, said uncertainty about the path of the economy has become more pronounced. "I think they are a little wary that inflation is going to stay stubborn at levels above the FED's target of 2%," he said. "That's why they are kind of proceeding quite carefully."

Markets celebrated last week when the Fed maintained its projections of three interest-rate cuts this year. For the week, the Dow Jones Industrial Average DJIA rose 2%, the S&P 500 SPX climbed 2.3% and the Nasdaq COMP advanced 2.9%. However, the three major indexes appeared lacklustre when markets opened today, with DJIA, NASDAQ and the S&P500 being in the reds. 

🚩🚩Many Fed watchers believe Powell downplayed recent strong inflation data. This was seen as a sign that he is willing to cut rates and is waiting to convince his colleagues to make a move. 🚩🚩

🚩🚩🚩HOWEVER, as we all know, Powell is well-known on going back on his words, bringing chaos and uncertainty to the stock market. As such, threading cautiously and safely would be the way to go over the next few weeks. 🚩🚩🚩

"Powell left little doubt about his intent to start cutting rates in the not-too-distant future," said Michael Feroli, chief U.S. economist at JPMorgan Chase. "My sense is still that the Fed has itchy fingers to start cutting rates, and I don't fully get it," said former Treasury Secretary Lawrence Summers, in a television interview. 

🚩🚩🚩The trouble is that Powell's colleagues may not be fully on board with a move. "There is a swelling group of Fed officials that believe rates may need to be higher for longer," said economists at Jefferies, in a note to clients. Should rates be higher for longer, Crypto markets will start going south pretty quickly. As much as crypto stocks can fly up by 20% in a day, they can also drop that same 20% the next day. Hence, I'd err on the side of caution and not trade in crypto stocks for the time being (given the recent run-up). Should crypto stocks fall back down to their previous support prices, then I'd see that as a signal of re-entry. 🤪😝 If you're already profiting in the following stocks, you may want to exit all or half of it. Do the risk analysis yourselves and trade safe yall. I've already exited mine for now. 🚩🚩🚩

$Marathon Digital Holdings Inc(MARA)$  $Riot Blockchain, Inc.(RIOT)$  $Iris Energy Ltd(IREN)$  $Coinbase Global, Inc.(COIN)$  

🚩🚩$CleanSpark, Inc.(CLSK)$  is overvalued at the moment and may have risen too quickly as a result of short coverage or what we call a short-squeeze. CLSK may soon see some correction. Even insiders are selling the stock at what they presume to be its 'peak price' because they themselves do not have confidence that CLSK will continue its run-up in the short run. There are loads of uncertainty for mining stocks going into the halving and until we see quality data and financials post halving, these stocks are very risky at these high prices. 🚩🚩

This group of Powell's colleagues who are not fully on board with June's move to cut rates came to light in the economic forecasts released by the central bank, the firm said. 7 of 19 Fed officials said that the "neutral rate" is above 3%. This suggests that they believe the Fed's current policy rate is not restrictive enough on the economy and the road to bringing inflation down to 2% seems like a bumpy one.

Jeremy Schwartz, senior U.S. economist at Nomura, said that Powell's dismissal of unfavorable inflation creates the risk that further upside inflation surprises could lead to a sharper reassessment of the path for policy. Schwartz sees only two cuts this year, one in July and the second in December.

The Fed's next policy meeting is April 30-May 1. Economists generally believe that Powell would want to use that meeting to "tee up" cuts at the next meeting June 11-12. Tang said it was clear the Fed wants to get started cutting rates, but might stop after the first few and see how the economy is responding. At the same time, the Fed is getting more worried about a recession, he said, with the central bank not seeing inflation getting back to its target until 2026. "It's not that a recession is immediate. But they don't want that risk to creep up. And they're willing to hold down that recession risk at the cost of slightly higher inflation for the next few years," he said.

The week ahead brings more housing data, with new home sales on Monday, the S&P Case-Shiller home price index on Tuesday and pending home sales Thursday, and consumer data sprinkled in between.

The big economic item will be Friday's PCE price index, the Fed's preferred inflation gauge. 

Fed Chairman Jerome Powell said last Wednesday that the index is expected to creep up to 2.5% in February, but stay at 2.8% on a yearly basis. 

The central bank wants to see 2% annual inflation though. 🫢🤭

So what do you guys think? 😵‍💫

Will the bears 💔 or bulls ❤️ reign? 

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