All things STOCKS

[BigOrangeMojo]

Anticipated rate cuts? I remain unconvinced given core CPI of 3 %. Just don't know how you square that with the Fed's goal of 2 %. A few years ago everyone jumped on the Fed for not realizing sooner that inflation was systemic and not transitory, and now those same people are criticizing the Fed for not assuming that current inflation is transitory.

The main thing keeping inflation somewhat in check is housing prices are tepid.

Tough spot for the Fed. Jobs reports indicate a cut is needed. Inflation reports indicate cut isnt needed. Adding in more stimulus from OBBBA plus tariff uncertainty makes it a tough decision...

 

[05_never_again]

Anticipated rate cuts? I remain unconvinced given core CPI of 3 %. Just don't know how you square that with the Fed's goal of 2 %. A few years ago everyone jumped on the Fed for not realizing sooner that inflation was systemic and not transitory, and now those same people are criticizing the Fed for not assuming that current inflation is transitory.

Remember when rates were moving higher a couple of years ago, the familiar refrain was "you have to discount those tech earnings at a higher discount rate, and they are growth stocks so those earnings are even further out into the future than normal stocks, so that's why they're getting hammered." Well, the S&P bottomed out on 10/13/22 at 3491. The yield on the 10-year that day was 3.95%. Almost 3 years later, the yield on the 10-year is even higher (4.29%) and the S&P is 84% higher.

I think it confirms something I've thought for a long time which is that equities don't care as much about the level of interest rates themselves as much as the rate of change in them. Rates are still hovering near levels not seen since before GFC, but they've been there for about 3 years now and it doesn't freak anybody out. I think it was the rate of change from COVID until Fall 2022 (and specifically that final push higher from ~2.6% to ~4.25% in 3 months) that caused so much angst, not so much that rates were at the levels they were at. There's just a lot of uncertainly when they're moving that fast, just like with the tariffs.

As for rate cuts, Fed funds futures are now pricing in a 95% chance of a September cut. I honestly don't know how many are there. As you mentioned inflation is above the Fed's target (nobody seems to mention that anymore) and the economy isn't weak.

 

[Thunder Good-Oil]

A couple of days ago I saw or heard that the Fed rate cuts will be 0.75% in the last 4 months of 2025. What was in doubt was whether the entire 0.75% happens in September, 0.25% each in September, October, and December or 0.5% and 0.25% in 2 of the 3 meetings.

 

[BigOrangeMojo]

A couple of days ago I saw or heard that the Fed rate cuts will be 0.75% in the last 4 months of 2025. What was in doubt was whether the entire 0.75% happens in September, 0.25% each in September, October, and December or 0.5% and 0.25% in 2 of the 3 meetings.

My guess is they will cut in Sept, hold in October and will play Nov and Dec by ear...

Only chance they dont cut in Sept is if the BLS throws out a job number that is utterly ridiculous...

 

[Jax_Vol]

A couple of days ago I saw or heard that the Fed rate cuts will be 0.75% in the last 4 months of 2025. What was in doubt was whether the entire 0.75% happens in September, 0.25% each in September, October, and December or 0.5% and 0.25% in 2 of the 3 meetings.

Talking heads are indeed saying that.

I'm not sold that J-Pow is aligned with any changes anytime soon.

 

[lawgator1]

Talking heads are indeed saying that.

I'm not sold that J-Pow is aligned with any changes anytime soon.

I am also surprised by the apparent consensus that there will be a cut in September given both the numbers today and the upward trend of the inflation numbers over the last few months. It seems like everyone bases that on some combination of a) there's a lot of political pressure to cut in September, and b) though inflation is on the rise its not as fast as many thought when tariffs were first announced.

Neither of those changes the reality that smoldering inflation, at an unacceptable level and slowly worsening, remains and shows no signs of suddenly reversing.

 

[Thunder Good-Oil]

My guess is they will cut in Sept, hold in October and will play Nov and Dec by ear...

Only chance they dont cut in Sept is if the BLS throws out a job number that is utterly ridiculous...

FOMC meets 3x after summer. This year they’ll skip November.

9/16-17
10/28-29
12/9-10

In 2024 they skipped October.

I’ll guess 0.25%, 0.5%, and 0.0%.

 

[Vol737]

A couple of days ago I saw or heard that the Fed rate cuts will be 0.75% in the last 4 months of 2025. What was in doubt was whether the entire 0.75% happens in September, 0.25% each in September, October, and December or 0.5% and 0.25% in 2 of the 3 meetings.

JMO, I think we get two .25 cuts, at the most, through the end of the year. I think the Fed is afraid to overshoot and we know they like to take their time to see it work through the system. They were late getting ahead of inflation as they thought it to be “transitory” and I expect them to drag their feet wrt cuts as I think they still view inflation as a threat although things have stabilized some.