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The fed funds rate currently stands in the 4.25%-4.50% range.
Plenty of investors believe the Fed will stick to its guns, even if the economy wobbles.
The Fed's economic projections showed rates dropping to 4.1% in 2024, higher than estimated three months ago.
She is expecting the gyrations that rocked bonds this year to continue, driven in part by investors second-guessing the Fed's commitment to keeping monetary policy tight.
"We have a generation of traders that has never seen the Fed not bail it out when push comes to shove."
The S&P 500 is down 14.4% year-to-date.
U.S. consumer prices rose less than expected in October, supporting the view that inflation was ebbing.
Further ahead, some of Wall Street’s biggest banks are now forecasting that the Fed's monetary policy tightening will bring on a recession next year.
In options markets, traders appear more preoccupied with not missing out on more gains in stocks than guarding against future declines.
The one-month moving average of daily trading in bearish put contracts against bullish calls on the S&P 500 index-tracking SPDR S&P 500 ETF Trust's options is at its lowest since January 2022, according to Trade Alert data.
REUTERS/Brendan McDermidNov 3 (Reuters) - Investors trying to navigate this year's relentless interest rate rises have more reasons to play it safe, after a pessimistic message from the U.S. Federal Reserve clouded the outlook for asset prices.
Yet Chairman Jerome Powell’s message at Wednesday’s press conference – which followed its fourth straight 75 basis-point rate increase – did little to bolster the case for a less hawkish Fed.
Investors are bracing for U.S. employment data on Friday for clues on whether the Fed’s rate hikes have begun to erode the economy’s strength.
Signs that inflation is beginning to slow after the Fed’s barrage of rate hikes could bolster the case for a less aggressive monetary policy in coming months.
Bartolini is becoming more bullish on mortgage-backed securities, which he expects to benefit from a decline in volatility sparked by smaller rate increases.
Here is a quick primer on what a steep, flat or inverted yield curve means, how it has predicted recession, and what it might be signaling now.
The yield curve, which plots the return on all Treasury securities, typically slopes upward as the payout increases with the duration.
read more read moreWHAT DOES AN INVERTED CURVE MEAN?
Before this year, the last time the 2/10 part of the curve inverted was in 2019.
When the yield curve steepens, banks can borrow at lower rates and lend at higher rates.
That left the yield curve even more inverted, a signal of looming recession.
Those declines have come as the Fed has already tightened rates by 300 basis points this year.
"We might not see as strong returns in the equity markets going forward now that interest rates have been somewhat normalized."
The shape of the Treasury yield curve, where short-term rates stand above longer-term ones, supports caution as well.
Known as an inverted yield curve, the phenomenon has preceded past recessions.
REUTERS/Brendan McDermid/File PhotoSept 19 (Reuters) - Just months ago, investors worried the Federal Reserve was not fighting inflation aggressively enough.
Several jumbo rate hikes later, some now fear the Fed will plunge the economy into recession by tightening monetary policy too quickly.
Investors are also pricing in meatier rate hikes down the road, with the terminal rate for U.S. fed funds now at 4.4%.
read moreDoubleLine’s Chief Executive Jeffrey Gundlach, who had in June criticized the Fed for moving too slowly, told CNBC last week he was worried the Fed might hike rates too far.
Some investors think the economy may be resilient enough to withstand a more aggressive Fed.