In his Daily Market Notes report to investors, Louis Navellier wrote:
The market is not buying the Fed's“no rate cuts in 2023.”
The Fed increased Fed Funds 25bps yesterday, as expected, and Jerome Powell said they weren't done, and that he did not see any rate cuts in 2023. What was the market reaction? A major rally. Most notably in the US Treasury market.Gates Capital Management Reduces Risk After Rare Down Year [Exclusive]
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q4 2022 hedge fund letters, conferences and more
While the Fed seems determined to go to over 5% on overnight funds rates before they're done and keeping it there until inflation is clearly headed back to their 2% target, the futures market is seeing Fed funds dropping to 4.37% by year-end. The market is betting that inflation will fall dramatically in 2023 and that the Fed will pull back.
The US market is not alone. Today, the ECB increased rates 50 bps and said they'll do another 50bps in March and interest rates are falling there too. The US 2-yr yield dropped to 4.04% this morning, since bouncing to 4.08%, still far from current overnight rates. The German 10-yr is down a stunning 20bps today to 2.09%. Table of Contents show
growth is back
Growth Is Back
Stocks are surging on the prospects of lower rates with the NASDAQ up 2.75% this morning and now up 16.9% YTD. Growth is back with a vengeance. Indeed, Meta Platforms (NASDAQ:META), reported better-than-expected results along with a major share buyback announcement and the shares are up 23% today and are up 51% YTD.
We've gone from a 'Don't fight the Fed' world to a 'Don't fight the market'. No one appears to believe or fear central banks, and the Bears are getting mauled. The fear of missing out is likely to bring in an increasing amount of the huge amount of cash on the sidelines into the fray.
A classic market melt-up. Interestingly, the Dow is not playing ball, still down after the first hour of trading, and was down as much as 279 at one point in the morning. Many market pundits are scratching their heads at the market's disbelief of the central bank's plans. But for now, the naysayers risk underperforming the market and their hand is being forced.
The earnings season is still in full session with apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and Alphabet (NASDAQ:GOOG) reporting after the close.
The best way to see things at this point is that even if the Fed keeps increasing rates, that record-low unemployment and a consumer that is willing to run up their credit cards to keep spending should keep the economy humming.
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