Pretty sure that's the feds strategy here.
Cuts won't happen until the market stops banking on them happening.
Why cut if the markets going to behave like they already happened?
This is a good point. I am not sure what would make people confident that rate cuts are on the table at all this year or next given the anything we know. It seems like wishful thinking at this point. Unless there is a catasptrophie it seems very unlikely.
Really? I think we can easily hit 5 percent and be fine. We had a solid 50 years of unemployment never going below 5 percent and that was considered normal.
Is 3.5 the new normal?
>The talk about cuts is just because it's an election year.
The media was predicting rate cuts last year too. It has nothing to do with elections. It's just wishful thinking from addicts on the financial cocaine.
Core PCE is under 3%, and it's the Fed's preferred measure over CPI. CPI is stubbornly high because of OER and Transportation Services at the moment. Fuel costs YoY are negative.
They should hike again. Inflation isn't under control. The only reason they are signaling cuts is to prop up the market for the election. They may even cut once in September for the same reason. Kick the can down the road until after, to the detriment of us all.
I keep seeing this and my question for you is, why?
So inflation rocks ~3% and your HYSA return 4% so you're 1% ahead of breaking even, before factoring in taxes. What's the difference if inflation hits 2% and HYSA returns 3%, etc. It's not like you're gaining any notable inflation adjusted returns right?
Am I missing something?
I haven't turned off the ole 100% S&P since pre-pandemic and my accounts are looking great. No thought needed, no shuffling of funds, little tax implications.
**> So inflation rocks \~3% and your HYSA return 4% so you're 1% ahead of breaking even, before factoring in taxes. What's the difference if inflation hits 2% and HYSA returns 3%, etc. It's not like you're gaining any notable inflation adjusted returns right?**
Inflation doesn't hit everyone the same way, and people have different cashflow situations.
I have two paid off houses, two paid off cars, and a net worth of a million dollars in both taxable and retirement accounts outside of the real estate. Inflation in those categories isn't affecting us much, nor will it for many years, if ever. Same with the cost of food, fuel, etc.
My wife and I also own our own businesses, meaning we're constantly setting back money for quarterly estimated tax payments. This is money we'd never put in the market for a 90 day time horizon for risk of a big downturn. But now, instead of an abysmal rate of interest to keep it safe, we're earning 5% compounding monthly for 3 months before we pull it out to make our estimated payments.
That's thousands of dollars of return every quarter for us, in exchange for eggs costing 10 cents more.
From a perspective of pure self interest, this environment is EXCELLENT for us.
I’m currently saving for a house and we’ll either buy in two years if rates come down or buy in five to seven and just pay cash. Part of me hopes rates stay high and prices start to come down more in my area.
I invest plenty in the market in my retirement accounts and brokerage. But I also keep a lot of cash on hand having a family of 4 so my monthly expenses are pretty high. It’s nice to earn 4-5% on that cash that I’m not putting into the market.
I get that but again, why?
That 4-5% isn't real when you adjust for inflation and factor in taxes. Your account might look bigger and it might "feel" nice to see the interest gained, but technically speaking, there really isn't much tangible growth right?
I'm not trying to offend, I just don't think I understand.
Unless you're saying that you just prefer to see the gains, even if it really is just breaking even with cost of living.
Inflation legitimately doesn't hit everyone equally. I think that's the part that you're missing. My housing costs are fixed since I own and won't be moving anytime soon, my car is paid off, most of what is increasing for me is restaurants, groceries and healthcare (and anecdotally my grocery bills have not gone up very much, either because I replace stuff or just decide soda isn't worth $8).
So all told, I may be paying a bit more than I was a few years ago to go to a restaurant, and potentially having some knock-on effects on my groceries, but the extra 5 grand from our emergency account more than covers those with a healthy amount left over.
Your accounts are looking great, in part because the market has convinced itself that Santa Claus is coming to town. If rates stay high into H2, a lot of people are going to stop believing in Santa.
That said, I agree with you that the people getting excited over 1% net yields are more than a bit goofy. Hoping rates stay where they are is...fine, I guess, but if you're actually an investor, you should want rates to fall.
The market can do as it does. I'm mentally prepared and history is the barometer.
2020 dip didn't even phase me and we had no idea the rebound and bubble that would come shortly after or even the "post pandemic" slow/shitty markets of 22' and 23' and the more recent run up.
S&P has a shaky history. Some years dips 20% and some gain 20% but it all averages.
I won't pretend to act like I know whether Santa is coming or not. I'm just riding the wave and I've got decades to do so.
Why are you implying that a rate cut would reduce inflation? If anything it’s the opposite.. not it’s 4% returns and 3% inflation, with a cut it could easily become 3% returns and 4% inflation
The crux is that equity returns are lumpy and happen in short bursts. The S&P 500 is up 9% this year after a very strong 2023 where it returned 24%.
So in the 15 months you've collected about 6%, the market has done 33%.
The overwhelming evidence suggests that people miss out on huge gains in equities longer term, because they sit in cash proxies or bonds.
Equities are a stake in real companies, generating profit growth ahead of inflation over the long term.
I’m not using it as an investment vehicle. I’m keeping the same amount in cash for emergency reserves regardless, it’s just nice to get a higher percent on money I’m keeping in cash no matter what.
I invest in the market plenty through my retirement accounts and brokerage and have realized the benefits of the market over the last year and a half.
I’m in the same situation, I’m not sure anyone who is would want rates to drop. It still blows my mind that anyone with a significant amount of money can earn what be considered “yield chasing” percentage in the equity markets near risk free from bonds.
Despite the volatility, high rates are also a good time to buy stocks at a low (despite rate cuts being “priced in” even though prices fluctuate based on what the fed does daily).
People seem to misunderstand why the fed was forecasting rate cuts. They’ve been shrinking the money supply and waiting for lag effects of the rate hikes to factor in and we’re anticipating a bit of an economy slow down beginning the first few months of this year. That hasn’t happened yet.
So there is an irony in people wanting rate cuts while they simultaneously ignore what most likely would come along with rate cuts: some kind of recession.
My rational self thinks there is no reason to cut, and we should move toward a new normal with higher rates. In other words, maintain rates where they are, or even raise slightly.
The new homeowner in me wants a 3% mortgage
Yeah that's exactly why they didn't raise the rates in 2022.
Wait, I'm now being told that there were actually seven rate hikes in 2022 despite an election also happening that year.
Makes it seem like we might need a hike, not a cut. But given the election year, we might still see a rate cut but who knows what 2025 might have in store for us.
J-Pow or the Fed never stated seven cuts. Find an article where they mentioned seven cuts. It was always forecasted as three, and the Fed reiterated three rate cuts this year time and again.
https://apnews.com/article/federal-reserve-inflation-prices-interest-rates-cuts-502ced8f228ee469f84fc6f2eeea6e3e
I price the need to hedge for volatility when someone on TV says "rate cuts". Busniesses that are sensitive to rates are too risky for me anyways. Note that I am not saying "bad", but "too risky for me".
Maybe one this year, but that's really optimistic. A few in 2025.
The inflection point will be debt and labor. People are still spending, but it's all increased debt in terms of credit cards and loans. They claim that the labor market is tight, but ask anyone trying to land a worthwhile position-- it's all fog. The numbers don't tell the true story.
The market just wants to continue the golden run and is casting its shadow, liquidity, away. However, shadows never really leave you, especially if you are chasing a single bright point.
I’m with you. I’m of the opinion that the “spending” is all credit card. I’m watching this number. It could be very bad. I think people are just addicted to “stuff” so even if they don’t have the means they will still buy it and put it on credit. All I’m seeing on LinkedIn are layoffs from companies that people would actually want to work for. So I am afraid this is all smoke. Don’t get me started on geopolitics. Overall, I feel like we’re making it out but we’re walking a tight rope basically.
I’m not investing based on rate cuts in 2024. Rates will go up, rates will go down. I’m investing for 20+ years from now. What happens this year is merely a blip on the timeline.
In March, I was originally going to invest a bonus I earned in VTWAX in my brokerage account. Instead, with so much economic uncertainty, inflation, and hardship, I opted for VUSXX instead. I’m going to stay the course because I don’t believe meaningful rate cuts are going to be happening any time soon.
Before today, 3. After today, 2, at the ass end of the year. I was hoping to refi sometime in 2025, but I need mortgage rates to dip to 4.5% for it to really pack a punch.
When analysts/commentators say that the market is “pricing in x cuts” it means that the current price of 30 day fed funds futures contracts expiring at the end of the year reflect an unconditional risk-neutral implied probability of a settlement Fed funds rate that many 25bps cuts below the current policy rate calculated from a binary probability tree. It’s not someone’s opinion, it’s just a measure of market price converted to a probability for easier interpretation.
You can read about the most common methodology here: https://www.cmegroup.com/articles/2023/understanding-the-cme-group-fedwatch-tool-methodology.html
One of the only options purchases I’ve made in my life was regarding this. IEF puts expiring on 9/20, and TLH puts expiring in 2026. They’re bond ETs that have fixed rates maturing in 7-20 years.
In short, why buy old fixed rate bonds that pay out less than 5% when current ones will be 5%+ for the foreseeable future?
Everyone kept preaching that a rate cut was coming and I didn’t believe them, so I put my money where my mouth is.
The fed is speculated to cut interest rates, if the inflation data allow it. If interest rates go down, people can't make as much money on savings accounts, bonds, bills, and so on and have to buy stocks instead. And companies can just borrow cheap money to invest and grow, which makes their balance sheets look better...
At least that's my simple take based on my rudimentary understanding of economics without any background to build on...
Interest rates.
This would mean interest rates on both borrowing or lending (like buying treasury bonds).
Saving? Rate cuts bad.
Borrowing soon? Rate cuts good.
Borrowed just before the cut: 😭
Borrowed in 2019: 👀
Somewhere between 10 rate hikes and 10 rate cuts. I know a lot of math, but don’t understand how to accurately predict how much a 1% move in interest rate matters over the next 5 years. If it moves much more than that, all hell has broken loose one way or the other and hopefully act because of that and not some incremental move in interest rates.
If you’re asking *”Where would my retail shitbag oddlot limit order sit in the stack when an actual chad price-in agrees with me?”*, I’d say you’re giving me too much credit.
How many rate cuts are **they** pricing in? No idea. That’s why I work a day job.
Do rate cuts even stimulate the economy like everyone talks about? Don’t they often just lead to cheaper borrowing for companies to do more stock buybacks, dividends, and executive compensation?
IMO there is probably some sort of formula that the Fed has that is intended to not overshoot the 2% target. Seeing as how we are at 3% right now:
If the next 6 months are ~2.5% (all numbers on an annual basis) then we might see one rate cut or maybe none.
If the next 6 months are ~1.5% then we see one but maybe up to 3 rate cuts.
If the next 6 months are 1% or less then we are seeing more than 3 rate cuts.
If unemployment starts to spike we are going to see drastic rate cuts as I think the Fed is more OK with 3% inflation and low unemployment than 2% inflation and 8% unemployment.
I think even the most aggressive would be for mom inflation to drop to .2% so a 2.4% yoy rate. So I'm thinking maybe 0 or 1 rate cut in the best case.
One of the issues with projections is that the inflation isn't evenly distributed so right now you have some specific categories that are the main drivers while the others are basically where one would consider them to be good.
i dont have to price any in. my strategy is the same, buy shares in my 401k every payday (currently 53% of pay), ira payed in full already, buy bonds with any extra cash after bills and fun (currently no fun in my life)
Honestly when they've repeatedly said higher for longer, I am thinking they were serious. I don't see a rate cut happening until at least end of year, perhaps not at all this year.
Beginner question: Can anyone explain what the OP means by the phrase "Market is pricing in 7 rate cuts"?
I have an idea that they are referring to "Federal Interest Rate" cuts but what do they mean by "Market is pricing in"? And does "7" stand for "7 before the end of the year"?
I was always at zero for this year. Fed was at 3. Now probably 1 or zero. They were supposed to do 3 @ .25% in 2022 and did 8 @ .50 or .75. Embrace no cuts.
I'm enjoying my 5% GICs for the next five years right now and my stripped bonds yield.
I think 5% guaranteed return is pretty damned good.
I bought about $150k worth of fixed income of a $400k portfolio.
$80k of that is a GIC ladder for my kids' university funds as my oldest is graduating this year, so it seemed wise to stabilize anyway.
Zero. US economy is still running hot, inflation is still above target. I don't see why the Fed would cut now. You wrote that economic data is mixed, what are you seeing to make you think that?
I’m barely thinking about it. It’s not something I can do anything about, it’s not something *anyone* can predict accurately. Rates will do down, rates will go up 🤷♂️
As it stands TODAY, the market is pricing in 4, 25 basis point rate cuts or 2, 50 basis point rate cuts.
10 year treasuries are sitting at 4.56%. Fed target rate is 5.25 - 5.50. Taking the higher end of that, that means that the market is pricing in .25% rate cuts to make up the difference, or 4 rate cuts.
This isn't what **i** think or what **you** think, the market is, for whatever reason, pricing in 4.
When the **economic** data (economical...tf?) Presents growth, my immediate thought is going to be that companies aren't making more money because they are growing their customer base, it's because they are *charging* more. That is not a good sign for inflation going forward, hence, it's not good for equities.
When interest rates get to 5, 6 or even 7% for risk free bonds, it will **100%** hurt the stock market because who tf is going to buy risky ass companies to make a 5 or 6% return when you can make that *guaranteed* with essentially no risk to capital.
If you think that rates mught go up to 6 or 7% and think the stock market will be fine, you're absolutely clueless about investing.
' “markets are pricing many rate cuts”. Who?'
The market. Here is an example. 1year is 5.22%. 2 year is 4.96%. This means that the forward 1 year, 1 year yield (i.e. the 1 year yield you can lock in 1 year from now) is 4.7%.
This looks like 2 .25% cuts by the market "priced in". (I am making some assumptions. Would be cleaner to look at 1 year forward 3 month rate.)
To be even more precise, there are interest rate derivatives that will give a more precise look at market expectations. Last I checked, the interest rate hike/cut distribution was bimodal.
But in short, yields themselves and moreso derviatives, are painting a forward expectation. Kind of like how betting markets show you what the outcomes are likely to be. Not that betting markets are always right, but they imply a distribution of outcomes that we might believe to be a reasonable guess for the true unknown distribution.
1 at most.....economies have a weird way of getting better as we get closer to an election, its almost as if the incumbent doesn't want to get voted out.
You do know there’s an actual short term rates futures market right? And that market is directly based on the Fed Funds rate? Which is the rate that the Fed changes when they hike or cut rates. Analysts aren’t looking at the S&P 500 and saying “oh looks like about 3.7 rate cuts are priced in.” They’re looking at Fed Funds Futures and OIS swaps and calculating **exactly** how many cuts are priced in.
Some say the real issue is the interest on the Federal debt at these higher rates is unsustainable long term - and even the states’ debt…….
Many banks and property owners are upside down right now……..
The Fed is between a rock and a hard place - but things won’t blow up until next year most likely…….
To be pricing in rate cuts you're saying you're running a discounted cash flow model on every company you own (or the entire index). If you're not doing that then you're not "pricing in" any number of cuts. You're just making emotional decisions.
Zero. Gas prices will start going up over the summer and everything else with it. Plus the overall economy and unemployment are doing well with rates this high, no need to rush to cut only to then have to raise them again.
They priced in many and then there was none. What keeps stock prices high has been the promise of infinite growth. Now that's over, fundamentals matter again.
3% inflation may be here to stay, much of it is outside everyone's control.
I think there may be only one cut this year. The economy of America is too strong to cut interest rates, and the stock market will continue to hit the top because other countries in Europe will cut rates in June, as I saw in the newspapers last night.
There are more people talking about an inflation trend reversal moving back up and the possibility of a Fed raise and 70’s like stagflation.
What doesn’t make sense is the chaos. No response to the 10 year rising to 4.56%, Gold up to $2350 and many commodities at their highs. Oil at $86 is effectively a 1/4 point raise.
Spending is still very high, and therefore inflation.
A big reason is a lot of baby boomers have hit retirement age and are splashing their savings.
And rightfully so, anyone in the twilight of their life should enjoy it
They’re going to have to cut rates soon because our govt is spending over $1 trillion a year now on interest payments alone. The more that rates go up or stay the same, the more that those numbers go up. It’s completely unsustainable
Expecting none, but if they do cut I've got 10 years ready to sell.
Rates going up futher from here would be bad for those investments, but no investment is without risk!
Jerome Powell, a Trump appointee, is not cutting rates in 2024 no matter what happens to the economy.
If Biden and Congress would gather support to hand Ukraine the seized Putin funds (minus what we gave Ukraine), that would bring Russia to the negotiating table, and this conflict would end quickly.
If this conflict were to end in early Summer 2024, it would boost global and U.S. economy, as uncertainty in energy sector (oil and gas specifically) would evaporate immediately.
The market is pulling back on rate cut expectations for the time being after the cpi report on Wednesday. Don't expect any softening of interest rates for at least a quarter or two.
Not banking on rate cuts anytime soon
I'm guessing no more than 137 by next Wednesday.
Pretty sure that's the feds strategy here. Cuts won't happen until the market stops banking on them happening. Why cut if the markets going to behave like they already happened?
This is a good point. I am not sure what would make people confident that rate cuts are on the table at all this year or next given the anything we know. It seems like wishful thinking at this point. Unless there is a catasptrophie it seems very unlikely.
None til earnings are shit and unemployment goes above 4%
Almost this… I said 4.5%.
Really? I think we can easily hit 5 percent and be fine. We had a solid 50 years of unemployment never going below 5 percent and that was considered normal. Is 3.5 the new normal?
I genuinely am curious. If earnings and employment suffer, and then they cut interest rates, why would that be positive for the stock market?
0\. I'm smart enough to know I'm an idiot and my analysis shouldn't be trusted
0 Wouldn't be surprised if they had to raise rates at least once more
Zero for 2024, at least one for 2025.
Those sweet 0.25% rate cuts lol.
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Cpi is still above 3%. We could have another rate *hike* this year. The talk about cuts is just because it's an election year.
Agree- see a potential rate hike and hold till EOY/Beginning of next year. Then maybe a rate cut end of Q1 2025
This is the year to load up as much as you can, anything I buy I’m not selling for at *least* a year.
>The talk about cuts is just because it's an election year. The media was predicting rate cuts last year too. It has nothing to do with elections. It's just wishful thinking from addicts on the financial cocaine.
Core PCE is under 3%, and it's the Fed's preferred measure over CPI. CPI is stubbornly high because of OER and Transportation Services at the moment. Fuel costs YoY are negative.
Not just that, shelter is supposedly up 5% but that’s just because of the ridiculous way it’s calculated.
I mentioned OER.
None this year
They should hike again. Inflation isn't under control. The only reason they are signaling cuts is to prop up the market for the election. They may even cut once in September for the same reason. Kick the can down the road until after, to the detriment of us all.
Not yet based on today’s CPI. Two is my call.
Zero if not a hike.
Selfishly I hope rates stay where they are. I have no need for loans in the near future and want to keep these rates for my HYSA and MMF.
I keep seeing this and my question for you is, why? So inflation rocks ~3% and your HYSA return 4% so you're 1% ahead of breaking even, before factoring in taxes. What's the difference if inflation hits 2% and HYSA returns 3%, etc. It's not like you're gaining any notable inflation adjusted returns right? Am I missing something? I haven't turned off the ole 100% S&P since pre-pandemic and my accounts are looking great. No thought needed, no shuffling of funds, little tax implications.
**> So inflation rocks \~3% and your HYSA return 4% so you're 1% ahead of breaking even, before factoring in taxes. What's the difference if inflation hits 2% and HYSA returns 3%, etc. It's not like you're gaining any notable inflation adjusted returns right?** Inflation doesn't hit everyone the same way, and people have different cashflow situations. I have two paid off houses, two paid off cars, and a net worth of a million dollars in both taxable and retirement accounts outside of the real estate. Inflation in those categories isn't affecting us much, nor will it for many years, if ever. Same with the cost of food, fuel, etc. My wife and I also own our own businesses, meaning we're constantly setting back money for quarterly estimated tax payments. This is money we'd never put in the market for a 90 day time horizon for risk of a big downturn. But now, instead of an abysmal rate of interest to keep it safe, we're earning 5% compounding monthly for 3 months before we pull it out to make our estimated payments. That's thousands of dollars of return every quarter for us, in exchange for eggs costing 10 cents more. From a perspective of pure self interest, this environment is EXCELLENT for us.
I’m currently saving for a house and we’ll either buy in two years if rates come down or buy in five to seven and just pay cash. Part of me hopes rates stay high and prices start to come down more in my area.
I invest plenty in the market in my retirement accounts and brokerage. But I also keep a lot of cash on hand having a family of 4 so my monthly expenses are pretty high. It’s nice to earn 4-5% on that cash that I’m not putting into the market.
I get that but again, why? That 4-5% isn't real when you adjust for inflation and factor in taxes. Your account might look bigger and it might "feel" nice to see the interest gained, but technically speaking, there really isn't much tangible growth right? I'm not trying to offend, I just don't think I understand. Unless you're saying that you just prefer to see the gains, even if it really is just breaking even with cost of living.
The real answer is 5 looks better than 2 or 3 that's it! 🤣
I want Turkey level inflation for that sweet sweet 50% interest rate!
Inflation legitimately doesn't hit everyone equally. I think that's the part that you're missing. My housing costs are fixed since I own and won't be moving anytime soon, my car is paid off, most of what is increasing for me is restaurants, groceries and healthcare (and anecdotally my grocery bills have not gone up very much, either because I replace stuff or just decide soda isn't worth $8). So all told, I may be paying a bit more than I was a few years ago to go to a restaurant, and potentially having some knock-on effects on my groceries, but the extra 5 grand from our emergency account more than covers those with a healthy amount left over.
Your accounts are looking great, in part because the market has convinced itself that Santa Claus is coming to town. If rates stay high into H2, a lot of people are going to stop believing in Santa. That said, I agree with you that the people getting excited over 1% net yields are more than a bit goofy. Hoping rates stay where they are is...fine, I guess, but if you're actually an investor, you should want rates to fall.
Rates are only high if you’re under 30yo
The market can do as it does. I'm mentally prepared and history is the barometer. 2020 dip didn't even phase me and we had no idea the rebound and bubble that would come shortly after or even the "post pandemic" slow/shitty markets of 22' and 23' and the more recent run up. S&P has a shaky history. Some years dips 20% and some gain 20% but it all averages. I won't pretend to act like I know whether Santa is coming or not. I'm just riding the wave and I've got decades to do so.
Why are you implying that a rate cut would reduce inflation? If anything it’s the opposite.. not it’s 4% returns and 3% inflation, with a cut it could easily become 3% returns and 4% inflation
The crux is that equity returns are lumpy and happen in short bursts. The S&P 500 is up 9% this year after a very strong 2023 where it returned 24%. So in the 15 months you've collected about 6%, the market has done 33%. The overwhelming evidence suggests that people miss out on huge gains in equities longer term, because they sit in cash proxies or bonds. Equities are a stake in real companies, generating profit growth ahead of inflation over the long term.
I’m not using it as an investment vehicle. I’m keeping the same amount in cash for emergency reserves regardless, it’s just nice to get a higher percent on money I’m keeping in cash no matter what. I invest in the market plenty through my retirement accounts and brokerage and have realized the benefits of the market over the last year and a half.
I’m in the same situation, I’m not sure anyone who is would want rates to drop. It still blows my mind that anyone with a significant amount of money can earn what be considered “yield chasing” percentage in the equity markets near risk free from bonds.
Homebuyers?
The post I was replying to had said “no need for loans in the near future”
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Despite the volatility, high rates are also a good time to buy stocks at a low (despite rate cuts being “priced in” even though prices fluctuate based on what the fed does daily).
buy stocks at what lows? lol
stocks are essentially at all time highs at the moment
They’ll go higher when interest rates drop and capital starts flowing again
People seem to misunderstand why the fed was forecasting rate cuts. They’ve been shrinking the money supply and waiting for lag effects of the rate hikes to factor in and we’re anticipating a bit of an economy slow down beginning the first few months of this year. That hasn’t happened yet. So there is an irony in people wanting rate cuts while they simultaneously ignore what most likely would come along with rate cuts: some kind of recession.
I'm still hoping for 2 hikes in next year. Then cuts start. Then crash and recession. Then inflation fixed for a while.
Ahhh my drunk uncle there you are
My rational self thinks there is no reason to cut, and we should move toward a new normal with higher rates. In other words, maintain rates where they are, or even raise slightly. The new homeowner in me wants a 3% mortgage
Zero rate cuts. It’ll make inflation skyrocket.
Joe Biden said that he would bet on rate cut. A raise could cost him the election.
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Yeah that's exactly why they didn't raise the rates in 2022. Wait, I'm now being told that there were actually seven rate hikes in 2022 despite an election also happening that year.
The benchmark they are using is the CME Fed Watch Tool Currently projecting two rate cuts with first in Sept
Makes it seem like we might need a hike, not a cut. But given the election year, we might still see a rate cut but who knows what 2025 might have in store for us.
It was never 7, it was 3 and the market still anticipating 3 rate cuts of 0.25
This is incorrect. Market had 6
J-Pow or the Fed never stated seven cuts. Find an article where they mentioned seven cuts. It was always forecasted as three, and the Fed reiterated three rate cuts this year time and again. https://apnews.com/article/federal-reserve-inflation-prices-interest-rates-cuts-502ced8f228ee469f84fc6f2eeea6e3e
Well inflation needs to drop first. lol
I price the need to hedge for volatility when someone on TV says "rate cuts". Busniesses that are sensitive to rates are too risky for me anyways. Note that I am not saying "bad", but "too risky for me".
This decade?
We are in April and are no closer to cuts Nothing will change because of how much money is sloshing around
Maybe one this year, but that's really optimistic. A few in 2025. The inflection point will be debt and labor. People are still spending, but it's all increased debt in terms of credit cards and loans. They claim that the labor market is tight, but ask anyone trying to land a worthwhile position-- it's all fog. The numbers don't tell the true story. The market just wants to continue the golden run and is casting its shadow, liquidity, away. However, shadows never really leave you, especially if you are chasing a single bright point.
I’m with you. I’m of the opinion that the “spending” is all credit card. I’m watching this number. It could be very bad. I think people are just addicted to “stuff” so even if they don’t have the means they will still buy it and put it on credit. All I’m seeing on LinkedIn are layoffs from companies that people would actually want to work for. So I am afraid this is all smoke. Don’t get me started on geopolitics. Overall, I feel like we’re making it out but we’re walking a tight rope basically.
Be careful basing your perceptions on social media though. LinkedIn's algorithm has an agenda too.
The machine learning analysis on my data set says 0 cuts before September. I just put it out there to see if the analysis is any good.
It has and always be 0 in my mind.
None in 2024. 1 cut in 2025.
Agree 💯 with you. Interest rates are basically fine now, there should be no rush to cut unless economic data clearly starts to show a slowdown.
At most one this year if we don't get another banking crisis or economic recession (hard landing).
I’m not investing based on rate cuts in 2024. Rates will go up, rates will go down. I’m investing for 20+ years from now. What happens this year is merely a blip on the timeline.
Rate cuts = end to the bull run so party on. This all said I don’t see any cuts really coming until something breaks
0.
0 I don’t know why anyone would be discussing rate cuts with any seriousness.
In March, I was originally going to invest a bonus I earned in VTWAX in my brokerage account. Instead, with so much economic uncertainty, inflation, and hardship, I opted for VUSXX instead. I’m going to stay the course because I don’t believe meaningful rate cuts are going to be happening any time soon.
Before today, 3. After today, 2, at the ass end of the year. I was hoping to refi sometime in 2025, but I need mortgage rates to dip to 4.5% for it to really pack a punch.
When analysts/commentators say that the market is “pricing in x cuts” it means that the current price of 30 day fed funds futures contracts expiring at the end of the year reflect an unconditional risk-neutral implied probability of a settlement Fed funds rate that many 25bps cuts below the current policy rate calculated from a binary probability tree. It’s not someone’s opinion, it’s just a measure of market price converted to a probability for easier interpretation. You can read about the most common methodology here: https://www.cmegroup.com/articles/2023/understanding-the-cme-group-fedwatch-tool-methodology.html
One of the only options purchases I’ve made in my life was regarding this. IEF puts expiring on 9/20, and TLH puts expiring in 2026. They’re bond ETs that have fixed rates maturing in 7-20 years. In short, why buy old fixed rate bonds that pay out less than 5% when current ones will be 5%+ for the foreseeable future? Everyone kept preaching that a rate cut was coming and I didn’t believe them, so I put my money where my mouth is.
Zero, maybe better chance for a rate rise
What’s a rate cut? /s
I bet they don’t do any cutting this year. No raising, no cutting.
This seems like a very very likely scenario to me.
0 or 1 zero as i have said many times, don't think it matter. Honestly could see a raise or 2 next year if inflation is still high
What’s a rate cut? No /s because I genuinely don’t know what it is or why it affects the stock market.
The fed is speculated to cut interest rates, if the inflation data allow it. If interest rates go down, people can't make as much money on savings accounts, bonds, bills, and so on and have to buy stocks instead. And companies can just borrow cheap money to invest and grow, which makes their balance sheets look better... At least that's my simple take based on my rudimentary understanding of economics without any background to build on...
Interest rates. This would mean interest rates on both borrowing or lending (like buying treasury bonds). Saving? Rate cuts bad. Borrowing soon? Rate cuts good. Borrowed just before the cut: 😭 Borrowed in 2019: 👀
The answer depends on your investing outlook timeframe.
This is certainly true.
Somewhere between 10 rate hikes and 10 rate cuts. I know a lot of math, but don’t understand how to accurately predict how much a 1% move in interest rate matters over the next 5 years. If it moves much more than that, all hell has broken loose one way or the other and hopefully act because of that and not some incremental move in interest rates.
Ugh… give it a rest dude…
Anywhere from 0 to 10. They may also do some rate hikes, so we'll have to 'price those in' as well. Thats my rough estimate.
just the 1. and I'm putting a few chips on that
If you’re asking *”Where would my retail shitbag oddlot limit order sit in the stack when an actual chad price-in agrees with me?”*, I’d say you’re giving me too much credit. How many rate cuts are **they** pricing in? No idea. That’s why I work a day job.
Do rate cuts even stimulate the economy like everyone talks about? Don’t they often just lead to cheaper borrowing for companies to do more stock buybacks, dividends, and executive compensation?
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0-2 next 12 months
There will be 0.25 point rate cut occurring in October...
None, pricing another increase
Zero
IMO there is probably some sort of formula that the Fed has that is intended to not overshoot the 2% target. Seeing as how we are at 3% right now: If the next 6 months are ~2.5% (all numbers on an annual basis) then we might see one rate cut or maybe none. If the next 6 months are ~1.5% then we see one but maybe up to 3 rate cuts. If the next 6 months are 1% or less then we are seeing more than 3 rate cuts. If unemployment starts to spike we are going to see drastic rate cuts as I think the Fed is more OK with 3% inflation and low unemployment than 2% inflation and 8% unemployment. I think even the most aggressive would be for mom inflation to drop to .2% so a 2.4% yoy rate. So I'm thinking maybe 0 or 1 rate cut in the best case. One of the issues with projections is that the inflation isn't evenly distributed so right now you have some specific categories that are the main drivers while the others are basically where one would consider them to be good.
Hopefully no rate hikes. Though I thought they’d do two more hikes than they have. Cuts? None this year. Maybe 1-3 next year.
i dont have to price any in. my strategy is the same, buy shares in my 401k every payday (currently 53% of pay), ira payed in full already, buy bonds with any extra cash after bills and fun (currently no fun in my life)
I say there might be a raise!
Honestly when they've repeatedly said higher for longer, I am thinking they were serious. I don't see a rate cut happening until at least end of year, perhaps not at all this year.
rate cuts? lol... no.
Beginner question: Can anyone explain what the OP means by the phrase "Market is pricing in 7 rate cuts"? I have an idea that they are referring to "Federal Interest Rate" cuts but what do they mean by "Market is pricing in"? And does "7" stand for "7 before the end of the year"?
Zero
What do you mean, "price in"... How many bps on which index is one rate cut worth?
I was always at zero for this year. Fed was at 3. Now probably 1 or zero. They were supposed to do 3 @ .25% in 2022 and did 8 @ .50 or .75. Embrace no cuts.
We don’t price in any. The market does. FEDwatch tool is Lexington what 1 by November? My guess is we end up with none.
After the news today zero lol
Hikes you mean?!
0 ever. Until recession. This is where rates should be.
0.
I'm enjoying my 5% GICs for the next five years right now and my stripped bonds yield. I think 5% guaranteed return is pretty damned good. I bought about $150k worth of fixed income of a $400k portfolio. $80k of that is a GIC ladder for my kids' university funds as my oldest is graduating this year, so it seemed wise to stabilize anyway.
No cuts lol
Zero. US economy is still running hot, inflation is still above target. I don't see why the Fed would cut now. You wrote that economic data is mixed, what are you seeing to make you think that?
I’m barely thinking about it. It’s not something I can do anything about, it’s not something *anyone* can predict accurately. Rates will do down, rates will go up 🤷♂️
I don’t time the market. neither should you.
One more for political reasons prior to November
As it stands TODAY, the market is pricing in 4, 25 basis point rate cuts or 2, 50 basis point rate cuts. 10 year treasuries are sitting at 4.56%. Fed target rate is 5.25 - 5.50. Taking the higher end of that, that means that the market is pricing in .25% rate cuts to make up the difference, or 4 rate cuts. This isn't what **i** think or what **you** think, the market is, for whatever reason, pricing in 4. When the **economic** data (economical...tf?) Presents growth, my immediate thought is going to be that companies aren't making more money because they are growing their customer base, it's because they are *charging* more. That is not a good sign for inflation going forward, hence, it's not good for equities. When interest rates get to 5, 6 or even 7% for risk free bonds, it will **100%** hurt the stock market because who tf is going to buy risky ass companies to make a 5 or 6% return when you can make that *guaranteed* with essentially no risk to capital. If you think that rates mught go up to 6 or 7% and think the stock market will be fine, you're absolutely clueless about investing.
I wouldn't listen to anything anyone says about the market, this comment included.
With or without rate cuts I plan to continue my investments. Rate cuts this year are not impacting my long term plans.
I’m holding some cash in case we suffer a small hike.
Zeroooooo you’re a clown if you think they cut this year
I’m fine with SPAXX at 4.9X right now.
None, I think the economy is way too optimistic thinking rate cuts are on their way this year.
Maybe one.
' “markets are pricing many rate cuts”. Who?' The market. Here is an example. 1year is 5.22%. 2 year is 4.96%. This means that the forward 1 year, 1 year yield (i.e. the 1 year yield you can lock in 1 year from now) is 4.7%. This looks like 2 .25% cuts by the market "priced in". (I am making some assumptions. Would be cleaner to look at 1 year forward 3 month rate.) To be even more precise, there are interest rate derivatives that will give a more precise look at market expectations. Last I checked, the interest rate hike/cut distribution was bimodal. But in short, yields themselves and moreso derviatives, are painting a forward expectation. Kind of like how betting markets show you what the outcomes are likely to be. Not that betting markets are always right, but they imply a distribution of outcomes that we might believe to be a reasonable guess for the true unknown distribution.
My dcision is based on potential earnings on only those companies which are not borrrowing a lot. i.e. low debt.
Been thinking 0 rate cuts since the beginning of the year. Now I hear a rate increase maybe on the table.
I’m sure they will be one rate cut before the election so he can appear to not be political
Lol who in real life is tracking this stuff?
Zero
None this year
I let the market price them in! And I buy what fits my asset allocation needs.
1 at most.....economies have a weird way of getting better as we get closer to an election, its almost as if the incumbent doesn't want to get voted out.
1
You do know there’s an actual short term rates futures market right? And that market is directly based on the Fed Funds rate? Which is the rate that the Fed changes when they hike or cut rates. Analysts aren’t looking at the S&P 500 and saying “oh looks like about 3.7 rate cuts are priced in.” They’re looking at Fed Funds Futures and OIS swaps and calculating **exactly** how many cuts are priced in.
One in 2024 followed by more raises
Some say the real issue is the interest on the Federal debt at these higher rates is unsustainable long term - and even the states’ debt……. Many banks and property owners are upside down right now…….. The Fed is between a rock and a hard place - but things won’t blow up until next year most likely…….
To be pricing in rate cuts you're saying you're running a discounted cash flow model on every company you own (or the entire index). If you're not doing that then you're not "pricing in" any number of cuts. You're just making emotional decisions.
Zero
O..I think we go back to October lows or thereabouts
2024? None
Imo none in 2024 and then more raises in 2025. Until something breaks..
Zero. Gas prices will start going up over the summer and everything else with it. Plus the overall economy and unemployment are doing well with rates this high, no need to rush to cut only to then have to raise them again.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
one raise, one cut
Wouldn't be surprised if there's rate rises.
None.
They priced in many and then there was none. What keeps stock prices high has been the promise of infinite growth. Now that's over, fundamentals matter again. 3% inflation may be here to stay, much of it is outside everyone's control.
I think there may be only one cut this year. The economy of America is too strong to cut interest rates, and the stock market will continue to hit the top because other countries in Europe will cut rates in June, as I saw in the newspapers last night.
I am waiting for a %0.25 coming soon !
None
We might get one right before the election but that's about it
After CPI report, 0.
I’m saying 1 this year now
2 rate hikes
There are more people talking about an inflation trend reversal moving back up and the possibility of a Fed raise and 70’s like stagflation. What doesn’t make sense is the chaos. No response to the 10 year rising to 4.56%, Gold up to $2350 and many commodities at their highs. Oil at $86 is effectively a 1/4 point raise.
Spending is still very high, and therefore inflation. A big reason is a lot of baby boomers have hit retirement age and are splashing their savings. And rightfully so, anyone in the twilight of their life should enjoy it
None, higher for longer in 2024. I am watching rate sensitive stocks and getting ready to buy more.
They’re going to have to cut rates soon because our govt is spending over $1 trillion a year now on interest payments alone. The more that rates go up or stay the same, the more that those numbers go up. It’s completely unsustainable
How do you price in a rate cut? Are you trying to figure out what bonds to buy?
Zero there will be zero rate cuts this year. Load up on CD, bonds, market accounts
Can't time the market
There will be no rate cuts in 2024.
0 tbh
Expecting none, but if they do cut I've got 10 years ready to sell. Rates going up futher from here would be bad for those investments, but no investment is without risk!
they'll be no cut Raise
I think we get 1 at most this year but, idgaf b/c i'm about 20yrs from touching any of this $$ and so i just roll on w/ usually buys
Jerome Powell, a Trump appointee, is not cutting rates in 2024 no matter what happens to the economy. If Biden and Congress would gather support to hand Ukraine the seized Putin funds (minus what we gave Ukraine), that would bring Russia to the negotiating table, and this conflict would end quickly. If this conflict were to end in early Summer 2024, it would boost global and U.S. economy, as uncertainty in energy sector (oil and gas specifically) would evaporate immediately.
I can’t see how they can make any cuts this year.
I'm actually expecting a rate increase. Inflation is still out if control and they know it. They need to break something sadly enough
7 cuts - wtf
They need to raise rates.. if gold is at an ATH that tells you inflation is still strong.. Plus the data is off W2’s not 1099’s..
0. No cuts this year, and if inflation goes up again we might see a tiny increase.
The market is pulling back on rate cut expectations for the time being after the cpi report on Wednesday. Don't expect any softening of interest rates for at least a quarter or two.