When Will They Cut?

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When Will They Cut?

This morning, the odds of a 25 basis point hike next month jumped to 95% at CME Fed Watch. The odds of a 50 point hike are now hard to see without a microscope. The markets have priced in that small hike in February, and another 25 points in March.Then, it starts to get murky. There are rate hike expectations of 5.0% in the Fed’s most recent minutes. But there are market participants now betting that cuts could come this summer – a decision that would be a stunning pivot by the central bank. And that brings us to our next phase. We will start to shift from a period when the markets speculate when the Fed will go from rate hikes to rate cuts. And this will likely produce a period of volatility that most traders haven’t anticipated. We’re about to enter earnings season tomorrow. We’ll get updates from the Big Banks, Delta, and a few other important names. Over the next two months, the question will center around forecasts and whether earnings compression will hit the market. 

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