Wall Street’s ‘Foolish’ 2024 Trade

Wall Street is rethinking the likelihood of early policy easing at the Fed. As we’ve been saying for some time now, we also think expectations of strong rate cutting have been oversold.

The Bloomberg article by Denitsa Tsekova highlights investor concerns about early monetary easing in 2024. A Bloomberg Markets Live Pulse survey shows that two-thirds of respondents consider bets on early rate cuts as unwise. Despite the S&P 500 reaching an all-time high, there’s rising anxiety over the US economy’s resilience and Federal Reserve officials’ reluctance to reduce interest rates prematurely. Traders, who initially forecasted six rate cuts for 2024, have revised this to five, showing uncertainty about the Fed’s monetary easing timeline. The article also discusses shifting investor sentiment and skepticism about January as an indicator for the year’s financial trend.

Our take: March Rate Cut a Toss Up

The latest warning for investors unleashing dovish monetary wagers across the board: Two thirds of Bloomberg Markets Live Pulse respondents said that betting on early monetary easing is the “most foolish” among popular trades heading into 2024.

Even as the S&P 500 closed Friday at an all-time high, money managers and analysts are contending with data that signals US economic resilience and Federal Reserve officials who’ve pushed back against reducing interest rates too soon.

…San Francisco Fed President Mary Daly on Friday, meanwhile, said it’s “premature” to think rate reductions are around the corner, noting she needs to see more evidence that inflation is on a consistent trajectory back to 2% before easing policy.

Read more (subscription may be required): Wall Street’s ‘Foolish’ 2024 Trade – Bloomberg

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