URGENT: The FED Cancels Rate Cut, Market Plummets, Major Changes Ahead
Published: 2024-01-31
Status:
Available
|
Analyzed
Published: 2024-01-31
Status:
Available
|
Analyzed
Predictions from this Video
Incorrect: 0
Prediction
Topic
Status
Goldman Sachs predicts five interest rate cuts in the current year, starting potentially next month.
"Goldman Sachs believes that we'll get as many as five rate Cuts this year beginning as early as next month."
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Inflation came in at 3.4%, higher than initially projected.
"with inflation coming in higher than projected at 3.4%"
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Shelter costs increased by 0.5% at the end of the year, contributing to headline inflation despite declines in other categories.
"housing for instance even though other items like fuel apparel Medical Care and food away from home all saw rather substantial declines shelter increased by half a percent at the end of the year"
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Core CPI, excluding volatile food and energy, decreased to 3.9%, the lowest since May 2021.
"cor CPI which purposely excludes more volatile categories like food and energy since those tend to be a bit more seasonal and because of that the FED believes that this is a more accurate measurement of whether or not we're heading in the right direction which is good news because cor CPI came in slightly less than the month prior at 3.9%"
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Excluding housing costs, inflation has been below 2% for nearly a year.
"if you remove housing from the equation since it's largely driven by one-year rental rates you'll begin to see that inflation has actually been below 2% for almost an entire year"
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The economy has navigated rapid interest rate hikes and a bear market in 2022, with strong job growth and declining peak inflation, suggesting a potential soft landing.
"we've seen the most rapid increase in interest rates ever in history we made it past a bare Market in 2022 with major indexes down as much as 15 to 20% and we've come down from the inflation peak of 99.1% all job growth stayed strong"
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The stock market is reaching all-time highs because investors anticipate declining interest rates.
"if investors anticipate rates will decline in the future or basically if we believe interest rates are going to be higher in the future stocks fall and if we believe they're going to be lower in the future stocks rise and that's why we're seeing almost all-time highs"
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The Russell 2000 index for small-cap stocks remains in a bear market, down 22% from its 2021 peak.
"despite record prices on the index the Russell 2000 which tracks small cap stocks is still in a bare market trading 22% lower than its 2021 Peak"
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The divergence between the S&P 500 bull market and the Russell 2000 bear market is unprecedented and may signal a slowdown in economic growth.
"This is also the first time ever that the S&P 500 is in a bull market when small caps are in a bare Market some economists even call this an economic bellweather it slump could be a sign that growth is about to slow"
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Historically, following a market downturn, bull markets have tended to lead to further all-time highs within a year, with positive total returns over 3, 5, and 10-year periods, excluding stagflationary eras.
"out of 11 bar markets since 1950 nine of them were worse and saw a larger drop than what we recently experienced all-time highs led to even more all-time highs one year later and besides the 1960s and 1970s era of stagflation three five and 10e total returns were also positive"
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Since 1990, market drops have historically coincided with Federal Reserve rate cuts.
"since 1990 every time the Federal Reserve lowers rates the market drops"
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The Federal Reserve historically lowers rates in anticipation of potentially disastrous economic events to mitigate their impact.
"instead they drop rates in anticipation of events that could be disastrous for the economy almost as a way to soften the blow before things get too bad"
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A potential market sell-off could occur due to rate hikes being priced in, the Federal Reserve being forced to cut rates due to national debt costs, or unforeseen 'black swan' events.
"since the market is always forward-looking it could sell off because rate hikes might already be priced in There's also the chance that the Federal Reserve is forced to lower interest rates if the national debt becomes too expensive to maintain or there's the chance of a Black Swan event that nobody sees coming"
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The percentage of homeowners considering selling their homes within the next three years has increased to 21% from 15% a year ago.
"21% are considering selling their home within the next 3 years up from 15% a year ago"
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Home values experienced month-over-month increases in only three of the top 50 US metro areas in December.
"home values only climbed month over month in just three of the largest 50 Metro areas in December"
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New home listings have increased by 2.1% compared to the previous year.
"new listings are up 2.1% compared to the year prior"
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Freddie Mac forecasts that mortgage rates will decrease in the latter half of the year, settling in the 6% range.
"Freddy Mack anticipates that mortgage rates will ease throughout the second half of the Year while remaining in the 6% range"
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National home prices are projected to increase by 2.8% in 2024 and 2% in 2025.
"We forecast home prices to increase 2.8% in 2024 and 2% in 2025 nationally"
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2024 is anticipated to be a 'pivot year' where home builders increase supply to meet pent-up demand for single-family and multi-family housing.
"2024 is going to be what's called a pivot year where home builders meet the pent up demand for single family and multif family housing adding some much needed Supply back on the market"
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Specific cities like Miami, San Diego, and Los Angeles may see slight price declines, while cities such as Indianapolis, Chicago, and Detroit could experience price increases of up to 5%.
"Miami San Diego Los Angeles Tampa Nashville Austin and Orlando among others are likely to see a marginal decline while Indianapolis New Orleans Chicago Pittsburgh Detroit and Louisville could see prices increased by as much as 5%"
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Forecasts for median home price changes in 2024 range from a 1% drop (Redfin) to a 0.2% drop (Zillow) and a 3% drop (Morgan Stanley).
"redin believes that 2024 will see a median drop of 1% Zillow thinks we'll see a drop of0 2% Morgan Stanley anticipates a drop of 3%"
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JPMorgan Chase predicts that housing affordability issues may be resolved by 2027.
"JP Morgan believes that affordability could be resolved by the time 2027 comes around"
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The Federal Reserve has decided to maintain current interest rates for the foreseeable future.
"the Federal Reserve has decided to once again pause rates for the foreseeable future"
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Interest rate cuts are likely to occur around the middle of the year.
"it'll probably happen towards the middle of the year"
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Jerome Powell indicated confidence that inflation is being managed and expressed concern about the potential negative impacts of overly restrictive monetary policy.
"Jerome Powell recently reflected a growing sense that inflation is under control and a growing concern about the risks that overly restricted monetary policy May pose to the economy"
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The Federal Reserve has removed the phrase 'unacceptably high' when describing inflation, suggesting a belief that inflation will continue to decline.
"they no longer include the phrasee unacceptably high to describe inflation while laying out reasons why they felt inflation would continue to fall"
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Almost all Federal Reserve officials anticipate a lower benchmark policy rate by the end of 2024, with most expecting at least a 0.75 percentage point reduction.
"all but two fed officials see The Benchmark policy rate lower by the end of 2024 than it is now with the majority of policy makers seeing it trimmed by at least 34 of a percentage point"
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Investors are currently pricing in a high probability of interest rate cuts in May (90%), June (100%), and July (80%).
"investors are pricing in a 90% chance of a rate cut in May a 100% chance of a rate cut in June and an 80% chance of a further rate cut in July"
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A Federal Reserve member believes there is no reason to cut interest rates as quickly or rapidly as in previous instances.
"I see no reason to move as quickly or cut as rapidly as in the past"
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The full economic impact of interest rate changes is typically felt between 6 to 18 months later, with an average lag of 11 months.
"there's also very much a lag effect to raising or lowering interest rates where the full effects aren't going to be felt throughout the economy for a following 6 to 18 months like the average delay is 11 months meaning we probably won't feel the effects of today until the end of the year"
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The current stock market's all-time high, driven by anticipation of rate cuts, is compared to the Bitcoin ETF hype, illustrating the 'buy the rumor, sell the news' phenomenon.
"this partially reminds me of some of the hype surrounding the Bitcoin ETF where prices were the highest from the anticipation of the event and not the event itself this is the entire backbone of the phrase buy the rumor sell the news"
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A recommended strategy is to continue investing as usual with a long-term perspective.
"keep investing as usual and invest long term"
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The average investor reportedly lost money despite a fund achieving a 29% annual return under Peter Lynch's management.
"the average investor lost money under Peter Lynch's tenure during a time where the fund returned around 29% annually"
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Investors tend to buy after a fund has already outperformed, driving prices up, and then sell when it underperforms, creating a self-fulfilling prophecy of market downturns.
"investors enter once it's already outperformed the market causing the fund to buy even more shares of the underlying companies causing them to go up in prices a result but once the fund underperforms and goes down investors sell causing them to sell the shares alongside with it becoming a self-fulfilling prophecy"
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A consistent long-term investment plan is suggested as the most profitable strategy, provided it is executed carefully.
"A good consistent long-term plan tends to make you the most money as long as you're careful about it"
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