To The Moon

US Bureau of Economic Analysis (BEA) will release US’s Personal Consumption Expenditure (PCE) data for for March 2024 on Fri, 26 Apr 2024 morning.

Is this reason why US market had a mixed performance on Wed, 24 Apr 2024, on the run up to inflation data release. (see below)

By the time market called it a day:

• DJIA: -0.11% (-42.77 to 38,460.92)

• S&P 500: +0.02% (+1.08 to 5,071.63).

• Nasdaq: +0.10% (+16.11 to 15,712.75).

*FYI, the PCE is the Fed’s go to reference material when shaping its monetary policy.

Comparison.

US Core CPI for March 2024 (3.8%) remained unchanged from February 2024 data and was +0.1% higher than Wall Street 3.7% expectations.

What is the likelihood that Core PCE remain status quo at 2.8% or (better still) matches Market expectations of 2.6%?

Afterall, the endgame on Wall Street and investors’ minds is “when will US Central Bank commences interest cut”?

Beware - Interest Cut ?

While US financial markets debate the timing of interest rate cuts, one tail-risk hedge fund warns that a shift to lower rates will signal a dramatic market crash.

According to Universa, CIO & Founder, Mark Spitznagel:

• An interest cut would take place only when economic conditions deteriorate, creating a challenging environment for markets.

• The Fed would cut interest rates in a panicked fashion when this market is crashing.

• He is skeptical of the notion that the US economy has entered a “no landing” scenario, where growth continues apace despite higher interest rates.

• Higher interest rates will eventually pop "the greatest credit bubble” in US history.

• This is because the excesses built up in the years of ultra-loose monetary policy (that resulted in the 2008 Global financial crisis) have not been squeezed out of the economy yet.

• Investors should take advantage of the hopes that the Fed can bring down consumer prices without hurting the economy.

Thankfully, Spitznagel's view is not widely held.

Instead, general consensus believes that the shift to a less restrictive monetary policy (by the Fed) will help lift both stocks and bonds markets.

Just that stubborn inflation has eroded expectations (to what extent) the central bank will be able to cut interest rates in 2024.

• Any interest rate cut/s definitely benefit the Housing sector.

• This is because mortgage rate has climbed to its highest 7%. (see above)

• It makes borrowings to purchase a house (an essential big-ticket item) out of reach of many.

• And resulted in a slump in the housing market overall.

Interestingly, on Tue, 23 Apr 2024, the Financial Times also “played” with the idea of the US Central bank raising interest rate in an attempt to drive inflation back to the target 2%. (see above)

Investors are now betting on a possible interest rate hike by the Fed, even though this seemed unlikely earlier.

Change in expectations comes after stronger than expected economic data in the US and comments from policymakers hinting at stricter policies.

Chances of a rate hike are still low, around 1 in 5 (or 20%), but they've gone up significantly in 2024.

This has impacted bond markets and caused stock market jitters.

Originally, investors expected the Fed to cut rates several times. Now, they expect one or two small cuts at most; thanks to resistant inflation data.

Some experts believe the Fed might actually raise rates again should inflation reverse course and rise instead of falling further.

If so, this would be a major change from the current plan.

For March PCE, economists are predicting a moderate increase from February’s data.

While a rate hike is a possibility, it is not the most likely scenario. Investors are still preparing for potential rate cuts, but at a slower pace than before.

Federal Reserve officials (John Williams, Christopher Waller etc..) have indicated they're open to raising rates again if necessary; despite their original plan to cut rates.

Based on options trading, there's a small chance of a rate hike this year, around 20% to 29%.

This is a significant increase from the beginning of the year when a hike seemed very unlikely.

While a rate hike is a possibility, interest rate cuts are also on the table.

There's still a lot of uncertainty beyond the horizon.

My viewpoints: (mine & mine only)

• I think US’s March PCE will either (a) remain status quo (same as February) or (b) be marginally higher.

• Will either outcome spook the US market, causing it to tumble?

• Take $Meta Platforms, Inc.(META)$ for example. Despite reporting better-than-expected profit & revenue for Q1 2024, shares fell when CEO Zuckerberg placed too much emphasis on expenditure.

• Conversely $Tesla Motors(TSLA)$ reported heavy losses that exceeded Wall Street estimates; yet it stock price rose when investors decided to lap up “unsubstantiated” tales & promises spun by CEO cum storyteller.

• There is a good chance the Fed will keep interest rates the same at their upcoming FOMC meeting from 30 Apr to 01 May.

My strategy - stay up-to-date on what's happening in the market and make sure things look good before buying any stocks or ETFs.

Must Read: Click on below titles to access. Give a like & help to Repost ok. Thanks.

• MSFT: Make or Break on 25 April 2024 ?

• META GOOG MSFT Earnings Save US Market ?

• Musk's Misses Hurt TSLA & His Credibility.

• Do you think the PCE data will be higher for March versus February ?

• Do you think the Fed might be forced to raise interest rate if inflation remains persistent or worse rises?

If you find this post interesting, give it wings! ️ Repost and share the insights ?

Do consider “Follow me” and get firsthand read of my daily new post. Thank you.

@Daily_Discussion

@TigerPM

@TigerStars

@Tiger_SG

@TigerEvents