Wednesday is the day of the Federal Reserve’s last interest rate decision of 2023. There is a near-certainty in the market that the Federal Reserve will maintain interest rates at their current target range of 5.25 to 5.25%, according to the Fed funds futures.
Investors eagerly await Federal Reserve Chair Jerome Powell’s statement following the decision. Jim Fishback, CEO and CIO of Azoria Partners, told News Source that he doesn’t think Powell will “validate any of the dovishness that the market is currently professing.”
A “hawkish meeting” is in store for tomorrow, according to Fishback.
To view the complete episode analysis, wherein the experts share their insights and discuss the most recent market developments, click here.
Audio Recording of the Video
SEANE WATSON: This morning, we received the CPI printout. We looked at it with the hope of gleaning some clues regarding the possible shape of Fed policy in 2024. Looking ahead to 2024, what do you think the chances are of that smooth landing?
Dear James Fishback, Seana, you have a fantastic question. It seems that most people are either for or against the idea of a soft landing; however, there is a third alternative, and that is to do nothing at all. What will the Federal Reserve do if, in six months, the job market remains stable—something we confirmed last Friday—and inflation begins to show signs of slowing down?
I don’t see them cutting rates by the amount that the market is currently pricing in, which amounts to more than 100 basis points from now until the end of next year. Chair Powell does not want that to happen since it might lead to inflation and even more economic activity.
Brent Smith: Yeah. Therefore, in the end, what are your expectations in terms of the tenor of the Fed, how it may change, and when that change may occur?
The meeting tomorrow is going to be really important, in my opinion, James Fishback. This is due to the fact that the Federal Reserve had previously stated that next year they would only use the dot plot to decrease rates once, which led to this meeting. In addition, they will slash prices by a factor of four based on what they see in the market. That, then, must be resolved.
In my opinion, Powell will not substantiate the market’s current dovishness. While tomorrow’s meeting may not be hawkish in and of itself, it will be hawkish in comparison to the current market consensus and the rates market.
SEANE WATSON: So, in your opinion, what will the market’s overly aggressive pricing of the rate cuts have on volatility going forward into 2024, beyond tomorrow and the next few trading days?
Dear James Fishback, Isn’t that the question worth a million dollars? “Good things happen to cheap stocks,” my old boss David Einhorn of Greenlight Capital used to say, and the inverse is also true: pricey stocks fall down. Since the market began to fully embrace the idea of impending rate reduction, the huge drop in 10-year rates occurred simultaneously with the rise we witnessed in November. What does the first quarter hold for stock prices as that begins to unravel? It will be crucial to keep an eye on that.
Barry Lachey is a Professional Editor at Zobuz. Previously He has also worked for Moxly Sports and Network Resources “Joe Joe.” He is a graduate of the Kings College at the University of Thames Valley London. You can reach Barry via email or by phone.
