December 9, 2024 Breaking News, Latest News, and Videos

Trading In A Climate of Expected Rate Cuts 

It’s official: US markets hit all-time highs on Wednesday, March 20, 2024. The minutes of the Fed meeting with Jerome Powell breathed new life into the financial markets. While a rate cut was not announced, expectations of three rate cuts before the end of 2024 were reinforced. The near-unanimous outpouring of support reverberated across Wall Street. Traders and investors doubled down on impending rate cuts slated for May and beyond. However, these cuts remain on the back burner due to unprecedented inflationary pressures.

The impact of collective sentiment is often more important than the reality facing market participants. In January 2024, the US Central Bank indicated a likely rate reduction by March. That didn’t come to pass. Markets reacted accordingly with a pullback. Now, expectations of a first rate cut by May are in the works. Recall that the ideal interest rate targeted by the Fed is 2%. The core inflation rate – sans energy and food costs – dropped below 2% over 3 and 6 months. There is, however, a 90% probability of a rate cut for the April 30 – May 1 meeting.

Analysts are calling it a ‘disinflationary trend.’ We are seeing robust consumer expenditure, particularly in Q4 2023 and Q1 2024. Aggregate growth in the US economy powered ahead at 3.3% on an annualized rate in the year’s final quarter, much quicker than economists expected. Strong inflation reports may damper the rate cut expectations, given the persistently high price rises in 2024. This begs the question: is the surge a blip on the screen or part of an ongoing trend? Yet traders are doubling down, especially on hot ticket items like the S&P 500, NASDAQ stocks, and Bitcoin ETFs at top trading platform sites. We see net positive inflows, delayed profit-taking, and expectations of further highs.

The 2024 FOMC Meetings will continue for six more sessions in 2024. The statement issued by the FOMC on March 19 – 2020 24 reads as follows:

Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. The committee seeks to achieve maximum employment and inflation at the rate of 2% over the long run. 

The committee judges that the risks to achieving its employment and inflation calls are moving into better balance. The economic outlook is uncertain, and the committee remains highly attentive to inflation risks. The committee decided to maintain the target rate for the federal funds rate at 5 1/4 – 5 1/2%. 

The committee does not expect it will be appropriate to reduce the target range until leaders gained greater confidence that inflation is moving substantially towards 2%… The committee is strongly committed to returning inflation to its 2% objective.

Source: https://www.federalreserve.gov/monetarypolicy/files/monetary20240320a1.pdf 

The 2024 schedule for FOMC meetings is as follows:

MonthMeeting DatesNote
April/May30-1
June11-12*
July30-31
September17-18*
November6-7
December17-18*

Note: Dates marked with an asterisk (*) indicate a notation or a special consideration 

The Impact of Interest-Rate Cuts on Trading

An inverse relationship exists between interest rates and trading activity. The higher the interest rates, the lower the levels of trading activity, and vice versa. When rates rise, stock prices fall. The rationale is simple: it costs companies much more money to finance operations loans when interest rates are higher. This depresses profitability, returns, and dividends. As such, markets contract. Now, when market participants, a.k.a. stakeholders, anticipate a reduction in interest rates, this expands prospects, reduces costs, increases dividends, and excites aggregate spending. This has an expansionary effect on the financial markets. It increases cash flow and reduces pressure on stock prices.

The Federal Funds Rate (FFR) is the main interest rate driver of share prices. It is the same rate that credit unions, loans, banks, and savings institutions charge one another for overnight loans. The Fed heavily influences the FFR in order to control inflation. This is done through influencing the money supply. When the interest rate is high, more people are inclined to reduce loan applications. This cuts the credit money supply, but it also reduces the availability of cash and money in the economy since consumers and investors are likely to deposit their funds into higher-interest-earning accounts like fixed deposits, CDs, Treasury bonds, and so forth.

Conversely, a relaxing of interest rates (reduction) has an expansionary effect on the economy. People tend to apply for more loans, including credit card spending, home loans, personal loans, business loans, etc. This expands economic activity, drives new investments, and powers the stock market. People are also less inclined to invest their cash in banks and savings institutions since the yield is so low. The opportunity cost of having money locked up is not worth the potential yields foregone through investment.

Traders and investors understand these nuances and we see tremendous volumes of economic activity taking place at online trading sites, brokerages, and traditional investment houses.

Tags: in Sponsored
<>Related Posts

Key Points on Instagram API Docs for Integration

October 30, 2024

October 30, 2024

In today’s digital landscape, accessing data from social media platforms is crucial for businesses looking to enhance their strategies. Instagram,...

Lemon Law Explained: Protect Your Rights As a Consumer

October 29, 2024

October 29, 2024

Buying a vehicle, whether new or used, is an investment. No one expects to drive off to find the car...

Trendy Outdoor Spaces: How to Style Your Home for California Living

October 21, 2024

October 21, 2024

In California, one learns to live with the outdoors. With weather so fine and landscapes so beautiful, it is little...

Plan Your Perfect Destination Wedding at Presidente InterContinental Cancún Resort

October 15, 2024

October 15, 2024

When you think about that, planning the wedding of your dreams easily becomes one of the most exciting things in...

How to Choose the Best Home Warranty for California

October 3, 2024

October 3, 2024

Understanding the different safety nets available is crucial when protecting your home, especially in California. A home warranty, often confused...

How Santa Monica’s Offshore Gambling Industry Was Replaced by a Different Offshore Gambling Industry

October 3, 2024

October 3, 2024

The days of being whisked offshore to enjoy a glitzy night of gambling off the Santa Monica coastline are well...

When Is the Best Time To Buy a Home Warranty?

October 2, 2024

October 2, 2024

Ever found yourself stressing over a broken fridge or a malfunctioning air conditioner? That’s where a home warranty comes in...

Top Features of the Crazy Time App: Why It’s a Must-Have for Game Fans

September 4, 2024

September 4, 2024

The Crazy Time lucky download app has become a favorite among casino game enthusiasts. In this article, we will explore...

Personal Injury Law and the Right to Fair Compensation

September 4, 2024

September 4, 2024

Accidents are unfortunate events that can disrupt your lifestyle and earning potential. However, personal injury law provides a vital mechanism...

S.M.art Cities – 5 Global Cities Leading the Charge on Innovative City Planning 

September 1, 2024

September 1, 2024

According to data from the United Nations, 5 billion people, or about 70% of the world’s population, will be living...

Twin Casino: Top Slots, Live Games with cool Dealers

August 31, 2024

August 31, 2024

Twin Casino has been steadily gaining popularity in the online gambling world, known for its modern interface, user-friendly platform, and...

What Is Commercial Cleaning? An Essential Guide For Business Owners

August 15, 2024

August 15, 2024

Running a business involves many responsibilities. One that’s often overlooked is keeping the workspace clean. This is where commercial cleaning...

Cruising Through Santa Monica’s Car Culture

August 9, 2024

August 9, 2024

Santa Monica, a vibrant city nestled along California’s iconic Pacific Coast Highway, is known for its sun-kissed beaches, lush parks,...

SMART Content Creator – The Road to Monetization and Influencer Success 

August 9, 2024

August 9, 2024

Not everyone creates content the right way. Worry not! That’s why we are here. In this quick read, we’ll guide...

How to Avoid Gambling Addiction: Key Strategies for Aussie Casino Players

August 6, 2024

August 6, 2024

One of the serious concerns for many online casino players is the addiction to gambling. In this regard, techniques must...