interest rate cuts

Weekly Update

What’s Going On With Interest Rates?

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Published March 7, 2025

For much of the past four years investors have focused on inflation and the Federal Reserve’s fight against it. While the Fed only controls the very short-term interest rate, their words about potential future Fed moves affect interest rates much further out in time.

In December, the Fed surprised investors by pulling back on expectations for coming interest rate cuts. Inflation has stabilized albeit at levels that might be higher than the Fed would like. But over the past two weeks, interest rates have suddenly fallen sharply, appearing to diverge from the Fed-driven path. (more…)

Weekly Update

Will It Be Different This Time?

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Published August 23, 2024

 

The market is eagerly awaiting the commencement of Federal Reserve interest rate cuts next month. The sharp, nonstop rebound from the August selloff provides ample evidence of investor enthusiasm for the upcoming cuts. Market interest rates have fallen back to where they were 18 months ago. The chart below shows how the yield curve has changed over the past year. The left side of the curve displays very short-term rates (1 month to 1 year) which are driven by the Fed. They have been anchored to the Fed’s 5.25% short-term target rate while the longer-term rates have fallen notably.

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Weekly Update

An Overbought, Concentrated Market

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Published June 14, 2024

 

Below is a good overview of the state of the stock market from MarketWatch and Apollo.

“Twenty-nine. That’s how many new records the S&P 500 SPX has registered so far in 2024, having closed at a new peak on Thursday (though lower futures on Friday suggest it may not make 30 this session).

Hopes for interest rate cuts later this year and excitement over AI have helped propel the bull run.

And yet, there are many reasons to be wary right now, say the bears. First, an obvious short-term technical one. The 14-day relative strength index of the Nasdaq 100 NDX, whose big tech constituents have been powering the rally, has moved up to 77.5, well above the overbought threshold of 70. (more…)