Discussion
The Fed likes to communicate through former FED officials when behind the self-imposed blackout curtain and it’s important to pay attention. This morning Rich Clarida told Bloomberg that markets looking for cuts to start next March makes sense, if not at least FED guidance at the March 2024 meeting for cuts to start soon. This comes on top of Mary Daly telling CNBC last week that rate cuts aren’t all that far off.
Against the backdrop of the deflationary, fatter left growth tail The Kitty has been discussing (see write-up from this below), March 2024 cuts timing makes sense. However, the fact the Fed is potentially starting to communicate those cuts already while supposedly trying to maintain “higher for longer” pricing in order to bring down inflation is a VERY notable change in tone that needs to be closely monitored from an equity market structure perspective.
Until labor market data really begins to roll, the Fed floating cuts is equity market supportive. So, this change in tone must be part of the “weight of the evidence” stop loss for shorts.