US Stocks, Bonds, Oil, & Gold All Down As Fed Governor Waller Wrecks Rate-Cut Party


Overnight comments by Fed Governor Waller in a speech and discussion raised the risk that the first cut could come slightly later than the market's expectation of March and that the pace of cuts could be quarterly from the outset, rather than the market's more aggressive forecast of three initial consecutive cuts followed by a switch to a quarterly pace.

On the timing of the first cut, Waller said he believes that the FOMC will be able to lower the funds rate “this year.”

On the speed of cuts, Waller said the funds rate “can and should be lowered methodically and carefully” and that he sees “no reason to move as quickly or cut as rapidly as in the past,” when the FOMC was combating recessions.

Waller also noted that next month's scheduled revisions to CPI inflation (the seasonal factors will be revised on February 9) could influence his thinking on rates cuts, especially if the revised data show a less clear deceleration recently.

The result was most evident in the drop in the market's expectations for a rate-cut in March...

Those comments saw the US 10yr back over 4% and the USD also had a run up putting pressure on the aussie battler now at USD$0.6582

US Stocks did not like Waller's comments at all but while yields were higher, the growthy/long-duration tech stocks actually outperformed (ending red despite a late-day panic-bid algo ramp try to get green) while Small Caps were the most punished...

Bitcoin rallied back above USD$43,000 today, but well off the pre-ETF highs...

After the Iowa win, Trump's odds of winning the election are now at the highest, and 3 ppts above Biden...

As Goldman notes, on balance, a Republican 'sweep' looks likely to increase the chances of a stronger USD, higher breakeven inflation rates, higher yields, and a steeper yield curve. 

I’ll guess we’ll all find out in NOV2024!

Happy Wednesday!

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