Higher for Longer?

Ticking Higher
“I Need to See More Progress”
Potential Sparks
No Better Time for an SIC
New York, DC, and Tiffani

“There is a difference between you and me. We both looked into the abyss, but when it looked back at us, you blinked.”

-Batman, referencing Nietzsche in 2010’s Justice League: Crisis on Two Earths

-My first thought on the quote: Think Jerome Powell and the FOMC

The idea that “market expectations” tell us anything about the economy’s future is – or should be – in serious doubt. That’s not to say the market is wrong. It just changes its mind so often as to be useless. And most of the time, it changes its mind after the fact.

Currently we see this in the outlook for interest rate cuts. Futures prices implied as many as six cuts early this year even though the FOMC members who will actually make that choice were signaling nothing of the sort in their dot plots. The last round in January showed an average of three cuts expected, with two committee members wanting to hold rates steady all year.

feds new dot plot

The market is still telling us they expect the Fed to cut 4 times this year. Here is the market projections for rate cuts after the NFP release. The market will be wrong.