Interest Rates – Fed Funds Rate Goldman Sachs now expects the Fed to implement three rate cuts in 2024, down from its earlier projection of four rate cuts, in response to elevated inflation data and evolving economic conditions. Image: Goldman Sachs Global Investment Research
Sentiment/VIX Composite vs. Fed Funds During a rate hiking campaign, bullish sentiment tends to increase initially, but ultimately ends badly. Image: Real Investment Advice
U.S. Implied Policy Rates – Federal Funds Futures Market expectations for Fed policy have swung dramatically over the past few months. Image: J.P. Morgan Asset Management
U.S. Fed Funds Target Rate Historically, there have been many instances where interest rate cuts have coincided with significant financial events and have had an impact on the U.S. stock market and the broader economy. Image: BofA Global Investment Strategy
Flows into Money Market Funds Money market funds have seen strong inflows since the start of the year. Investors continue to show a strong affinity for cash, seeking for more defensive approaches to the market. Image: BofA Global Investment Strategy
Equity – Leveraged Funds and Asset Managers Net Future Positions Leveraged funds and asset managers remain very net long S&P 500 futures, suggesting their confidence in the upward trajectory and potential profitability of the U.S. stock market. Image: Goldman Sachs Global Investment Research
Share of U.S. Equity Mutual Fund and ETF AUM Passive U.S. equity funds surpassed active ones in 2020. Investors prefer them for their lower fees, potential tax benefits, and doubt in active fund managers’ ability to consistently outperform the market. Image: Goldman Sachs Global Investment Research
Fed Funds Rate – Target Probabilities at the Fed’s FOMC Meeting Traders currently see a 14.5% probability of a 25-bps rate cut at the FOMC meeting on January 31, 2024. Image: CME Group
Fed Funds Rate and Dow Jones Index In the same way as it was in the 1970s, it’s all about the Federal Reserve. Image: BofA Global Investment Strategy
U.S. Core CPI Minus Unemployement Rate % vs. Fed Funds Rate The Fed rarely cuts rates when core CPI exceeds the unemployment rate, reflecting the central bank’s concern about potential inflationary pressures in the economy and its emphasis on price stability. Image: BofA Global Investment Strategy