Traders in futures markets, which allow investors to bet on where interest rates are headed, are wagering on one, and perhaps two, quarter-point cuts by the end of the year. At the start of the year, traders were expecting six cuts over that period.
At first, the shift appeared to be welcomed by stock investors, as it came against a backdrop of a strong economy that would support corporate profits. But recent inflation reports have disappointed investors and economists.
John Williams, the president of the New York Fed, said this week that it was possible that another increase, rather than a cut, to rates might be warranted if inflation remained sticky, even if that wasn’t the most likely scenario. Other officials have noted that the Fed may have to wait until much later this year, or even 2025, to begin easing rates. So far, worries have yet to intensify to the point of threatening the strength of the U.S. economy. Although the S&P 500 has fallen more than 4 percent this month, it remains about 5 percent higher for the year.
And a recent survey of fund managers around the world by Bank of America showed the most optimism since January 2022, with respondents expecting global growth to accelerate. The biggest risk, according to the respondents, is a rise in inflation that could keep interest rates elevated, squeezing growth abroad and at home.
Reflecting some of those worries, the Russell 2000 index that tracks smaller companies that tend to be more sensitive to the outlook for the domestic economy, has slumped to a loss of roughly 5 percent for the year.
“I think the recent selling pressure is just the beginning of a larger move,” said Peter Tchir, head of macro strategy at Academy Securities.
Kaynak: briturkish.com
