I haven’t traditionally watched the CME FedWatch tool to see what expectations are for Fed rate cuts – an occasional glance. Now I am watching it everyday–I think because my point of view has been so contrary to the general view out there. Simply I have not seen data that has consistently screamed ‘we need a rate cut!!!’ Yes inflation is coming down, but remains above the Fed’s target. Employment has slowed a bit from a year ago, but remains decent. Is there pain in real estate and in the banking sector–yes of course there is, but this certainly should have been expected at some point in time.
Anyway–the CME FedWatch tool is showing a 59.5% chance now of a rate cut at the March FOMC meeting–down from 70%. The tool shows a 2.6% chance of a rate cut in January–fat chance.
Yesterday markets were a bit soft-this morning equity futures are soft. Maybe markets are going to slowly adjust to ‘higher for longer’ interest rates? We haven’t seen huge volatility for a long, long time–remember when we would see equity markets move 1% daily? They don’t happen often anymore–I am fine with that–just pay me my interest and dividends on the 15th or 30th–I’m happy.
Yesterday I did nothing at all. I think I mentioned previously that February and March will bring giant sized maturities of CDs in our accounts and I have no idea at this moment where that cash will go. Some of my favorite positions are ‘full up’–some of my ‘sock drawer’ holdings have room to add shares, but the yields are below my target (7%) which means I need to balance these with higher risk issues. I really need to do more due diligence to prepare for the next 2 months.
Today we get retail sales numbers for December–a number that will be watched closely and then we get the Fed Beige Book release–we will get anecdotal points of view from Fed regions from this. Also we have 3 Fed yakkers–we’ll see if they are trying to tamp down rate cut expectations–Fed yakker Waller certainly did so yesterday we he spoke.