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☆ Why it could be a 'lose-lose' situation for Wall Street when the Fed finally does cut rates
▼ + stars: | 2024-01-17 | by ( Brian Evans | ) www.cnbc.com time to read: +3 min

Wall Street's outlook on Fed rate cuts is setting the stage for a "lose-lose situation," says Deutsche Bank macroeconomic strategist Henry Allen. Indeed, the last four times we've seen rate cuts that fast, it's been because of the most recent four U.S. recessions," he wrote. To be sure, rapid rate cuts without a preceding recession isn't an impossible scenario, but that doesn't mean it's likely either, Allen noted. Paul Volcker's chairmanship of the Fed in the 1980s, for example, saw steep rate cuts, although that followed a period of extremely restrictive monetary policy. "[It's] hard to see how both rate markets and risk markets can both continue to thrive as they have recently," Stanley said.

Persons: Henry Allen, Allen, Paul Volcker's, Allen isn't, Stephen Stanley, Stanley, Stocks, Deutsche Bank's Allen Organizations: Deutsche Bank, Markets, Federal, Traders, Santander U.S, Deutsche Locations: U.S, Vietnam

[1/2] The U.S. Capitol dome is seen from the Russell Senate Office Building on Capitol Hill in Washington, U.S., April 19, 2023. Despite the consensus on lowering inflation, the Fed is also reaching a point where opinions about the need for and timing of additional interest rate increases may start to diverge. In large part that job has fallen to the Fed, but it is a central bank of Biden's making. If the current crop of nominees is approved five of seven board members would be Biden appointees. The Fed under Powell has raised interest rates faster than at any time since former Fed Chair Paul Volcker's inflation fights of the 1970s and 1980s.

Persons: Sarah Silbiger WASHINGTON, Jerome Powell, haven't, Democrat Joe Biden, Donald Trump, Philip Jefferson, Lisa Cook, Adriana Kugler, Powell, Biden, Preston Mui, Mui, Paul, Howard Schneider, Jason Lange, Dan Burns, Andrea Ricci Organizations: U.S, Russell Senate, REUTERS, . Federal, Democrat, Republican, Federal, of Governors, World Bank, Fed, Financial, America, Reuters, Biden, Trump, Black Americans, Thomson Locations: Russell, Washington , U.S, U.S, Biden's

☆ CNBC Daily Open: The final hike?
▼ + stars: | 2023-05-03 | by ( Jihye Lee | ) www.cnbc.com time to read: +2 min

This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. That happened to be the name of Paul Volcker's autobiography: 'Keeping at It.' Jerome Powell is literally taking a page out of Paul Volcker's playbook," said Conzo. Subscribe here to get this report sent directly to your inbox each morning before markets open.

☆ CNBC Daily Open: One last hike?
▼ + stars: | 2023-05-03 | by ( Jihye Lee | ) www.cnbc.com time to read: +2 min

This report is from today's CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. It's Fed Day, the rate-setting Federal Open Market Committee is underway, and investors seem to be holding their breath as the meeting is expected to conclude with another 25-basis-point rate hike. As BlackRock's Chief Investment Officer of Global Fixed Income Rick Reider put it, "This is transitioning to the market's No. Subscribe here to get this report sent directly to your inbox each morning before markets open.

☆ Howard Marks says we are in the third sea change in his 53-year career on Wall Street
▼ + stars: | 2022-12-13 | by ( Yun Li | ) www.cnbc.com time to read: +2 min

Market veteran Howard Marks said higher rates and safer returns are signs of the market's third-ever sea change in his 53-year investing career. Memos from Oaktree Capital Management's Marks have gained a wide following on Wall Street, and even legendary investor Warren Buffett has said he reads them regularly and always learns something from them. Credit investors became able to demand higher returns and better creditor protections," Marks said. The investor warned that because of the sea change, investments that have worked well in the past might start to underperform in the coming years. "That's the sea change I'm talking about."

The local unemployment rate is already nearly a percentage point above the U.S. average of 3.5%. "It's very premature in my view to think about or be talking about pausing our rate hikes. The target federal funds rate is now in a range of between 3.75% and 4%, the highest since early 2008. In the 1970s and 1980s, Fed Chair Paul Volcker's attack on inflation sparked a recession that pushed the unemployment rate above 10%, then a post-World War II high. "I do worry about how rates affect the economy," Bostic said at the forum.

"Ongoing increases in the target range will be appropriate," the U.S. central bank said at the end of its latest two-day policy meeting. The language acknowledges the broad debate that has emerged around the Fed's policy tightening, its impact on the U.S. and world economies, and the danger that continued large rate hikes could stress the financial system or trigger a recession. The policy decision set the target federal funds rate in a range between 3.75% and 4.00%, the highest since early 2008. The U.S. central bank has raised rates at its last six meetings beginning in March, marking the fastest round of rate increases since former Fed Chair Paul Volcker's fight to control inflation in the 1970s and 1980s. The economy, the Fed noted, appeared to be growing modestly, with still "robust" job gains and low unemployment.

☆ Fed delivers fourth 75 bp hike, signals scale-back coming
▼ + stars: | 2022-11-02 | by ( ) www.reuters.com time to read: +6 min

This statement clearly suggests input from Vice Chair Brainard and opens the door for the Fed to slow down the pace of future rate hikes. Monetary policy today is not sufficiently tight enough. We’ll know when the Fed is done tightening; they’ll tell us by simply saying that monetary policy is sufficiently restrictive. “The last thing we need to see regarding what the Fed will do in the short run is the election. If there’s a sense that fiscal policy will be more cooperative with monetary policy, it will make the Fed’s job easier.”Compiled by the Global Finance & Markets Breaking News teamOur Standards: The Thomson Reuters Trust Principles.

☆ The Fed doesn't have to go 'full Volcker' on inflation and any pivot on its rate hike policy could end the stock market's downward spiral, Fundstrat says
▼ + stars: | 2022-09-28 | by ( Matthew Fox | ) www.businessinsider.com time to read: +3 min

The Fed doesn't need to go "full Volcker" on raising interest rates to combat inflation, according to Fundstrat's Tom Lee. "Compared to 1970s-1980s, today's inflation is nascent," Lee said, adding that inflation in 2022 is "hardly out of control." "Volcker needed to unwind 15 years of inflation," Lee said, which means his aggressive interest rate hikes were appropriate at the time. "Compared to 1970s-1980s, today's inflation is nascent," Lee said, adding that inflation in 2022 is "hardly out of control." That means any pivot in inflation, or the Fed's interest rate hike trajectory, or both, could lead to a big recovery in the stock market.

The rate hikes are the sharpest since the last time the Fed, under Paul Volcker's leadership, battled super-high inflation in the 1980s. But the projections do show Americans are in for some pain ahead as the Fed works to end inflation and prevent what Powell says would otherwise be even worse outcomes. By the end of 2024 policymakers see inflation at 2.3%, and easing to its 2% target by the end of 2025. Historically once the unemployment rate rises by half a percentage point, it continues to rise another point or two, if not more. Wednesday's projections show Fed policymakers have also become more pessimistic about the outlook for economic growth.

Those were the outcomes the last time the Fed, under Paul Volcker's leadership, battled super-high inflation in the 1980s. "While the Fed is still likely to view a soft landing as a modal outcome, the window appears to be narrowing," Bank of America economists wrote. Historically once the unemployment rate rises by half a percentage point, it continues to rise another point or two, if not more. This week's decision is expected to take the Fed policy rate to a range of 3%-3.25% from the current 2.25%-2.50%. Inflation projections, however, could stick close to those laid out in June, he said, amid "dueling forces from inflation persistence and a more aggressive Fed stance and likely recession."

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