![]() ![]() We have a couple of pretty high-profile tech companies reporting this week in Oracle ORCL and in Adobe ADBE. That way, at the January meeting, they can then be in a position to be able to give the market some forewarning that they are looking at starting to loosen monetary policy at that March meeting.ĭziubinski: On to earnings, you talked in your December market outlook on about how overvalued the tech sector is. I think now what the market is looking for and they’re waiting to hear is more signaling that the Fed is now starting to think about when they’re going to start cutting rates. I think at that point in time what that told the market is that the Fed was becoming more comfortable with inflation continuing to moderate. Then after the November meeting, we discussed how the messaging was shifting more toward a balanced approach between inflation and employment. The Fed really never wants to come out and surprise the markets when they start moving changes in the monetary policy. They really needed to start preparing the markets for when they’re going to reverse course and begin to ease monetary policy. 30 show, before the November Fed meeting, we talked about how we thought the Fed officials really needed to start shifting their messaging. But really what the market’s going to be focused on will be the commentary from Chair Powell during the press conference that he has afterward. The market will look for any change in the actual written language in the statement that’s released immediately after the meetings. That the Fed will hold study at that 5.25% to 5.50% range. ![]() Sekera: The market right now is pricing in no change in the federal-funds rate. Now it’s back down to a 40% probability for that 25-basis-point cut with almost no probability of a 50-basis-point cut. Even a 9% probability of a 50-basis-point cut before the jobs number came out. But if you look at the mark implied probability of a cut at that 2024 meeting in March, it went from as low as about a 12% probability a month ago to as high as a 55% probability. I talked to Preston Caldwell end of last week and even after the jobs number came out, he’s still of that opinion. Now, our opinion has long been that we do expect the first-rate cut to happen here in March. Right now there’s just really a lack of conviction out there as far as what the Fed is going to do and when it’s going to do it. I’d also say it’s really interesting, too, so I do look at the market probabilities for the Fed cuts. Especially in light of that stronger than expected jobs number last Friday. That assumption being that the Fed is done hiking rates at this point, and in fact is poised to start cutting rates in 2024. Because what would happen then is if it came in that high, I think that brings into question the market’s current assumption. But if it were to come in a lot higher, a lot hotter than expected, then I do think you could see the market sell off. If it’s only a little above what the expectations are, a little bit above consensus, that’s unlikely to change very many minds out there. ![]() Sekera: That’s going to depend on just how hot it comes in, if it does come in greater than expected. Which of course if you do see inflation at the producer level, then you would expect that to flow through to consumers over time as well.ĭziubinski: Dave, what might the impact be on the market if these inflation numbers come in hotter than expected? Now, that’s not as widely followed, but I think that also just gives another view on inflation coming in at the producer level. Also, in addition to CPI, we also have PPI, the producer number. The consensus there for core is for a 4% increase year over year, which is the same as last month. That’s what the economists really focus on. That’s slightly just below the 3.2% that we saw last month, but even more importantly is the core number, the core CPI. The consensus headline for CPI is for a 3.1% increase on a year-over-year basis. What’s the market expecting?ĭave Sekera: Good morning, Susan. Let’s talk first about the November CPI number. On your radar this week, Dave, are some pretty big things with the November CPI number and the Fed’s final meeting for the year among them. Every Monday morning, I sit down with Morningstar Research services chief US market strategist Dave Sekera to discuss one thing that’s on his radar this week, one new piece of Morningstar research, and a few stock picks or pans for the week ahead. Susan Dziubinski: Hi, I’m Susan Dziubinski with Morningstar. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |