![]() ![]() ![]() "Should the message delivered at this meeting lead to a re-pricing of bond market expectations for rate cuts in the second half of '23(i.e., rate cuts get priced out, leading to an implied path that's more in line with our economists' view for a pause), that could ultimately be a negative surprise for equities," Wilson explained. Instead, Wilson expects the Fed to pause interest rate hikes and cuts through the end of the year, essentially leaving the Fed Funds rate at a constant level of just over 5%. The market currently expects a 25-basis-point interest rate hike on Wednesday, followed by a pause that lasts until the two last FOMC meetings in November and December, in which two 25 basis point interest rate cuts are forecasted, according to the CME FedWatchTool. But the FOMC meeting on Tuesday and Wednesday could turn into a catalyst for lower equity prices if Fed chairman Jerome Powell alters the market's view about the future direction of interest rates. "We've found that investors are less focused on the upcoming Fed meeting as a potential risk event for equities," Wilson said in a Monday note. Investors are putting too much hope into the idea that the Federal Reserve will cut interest rates later this year, and that could set the stock market up for a sell-off, according to Morgan Stanley's equity strategist Mike Wilson.Īccording to Wilson, the Fed's FOMC meeting later this week should include another interest rate hike, as the market currently expects, but hawkish comments from the Fed could also reprice current interest rate expectations from cuts by the end of the year to a long-standing pause. The S&P benchmark has climbed 13.1 this year, while the Dow and the Nasdaq have risen 12.7 and 9.2, respectively. "If the message delivered at this meeting is more hawkish, it could provide a near-term negative surprise for equities," Wilson said. Any shift in the Fed’s dovish rhetoric could upend equity markets. Real Manufacturing and Trade Sales (for May 2023) Real Personal Income Less Transfer Payments. ![]() 1 policy meeting while also signaling that its battle against. Aruoba-Diebold-Scotti Business Conditions Index. Morgan Stanley's Mike Wilson said while a pause from the Fed is likely, interest rate cuts are not. WASHINGTON, Jan 20 (Reuters) - The Federal Reserve is set to again slow the pace of its interest rate increases at a Jan. The central bank's chair, Jerome Powell, will hold a press conference at 2.30 p.m. The stock market is poised for a sell-off as investors put too much hope in the Fed cutting interest rates. An interest-rate decision from the FOMC, or Federal Open Market Committee, is due at 2 p.m. With the Jackson Hole Fed meeting coming up, the market could be expecting taper talks as the Fed at some point will be looking to decrease their 120-Billion monthly bond-buying program. Federal Reserve Board Chairman Jerome Powell speaks during a news conference after a Federal Open Market Committee meeting on February 01, 2023. ![]()
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