‘Fed has a narrow window to cut rates in 2024’ - Versace
‘It’s election year, so being candid, June, November or December,’ says Tematica CIO, Chris Versace, ‘is likely to be the times when the Fed can cut rates’.
IGTV's Angeline Ong also asks Versace for his view on what Fed Chair, Jerome Powell, will say this week.
(AI Video Summary)
Versace feels rate cuts timing won't happen sooner
In this interview, Chris Versace, Chief Investment Officer of Tematica, talks with IGTV's Angeline Ong about the current state of the economy and how it will affect the Federal Reserve's decision to cut interest rates. Although the ADP private payroll numbers came in slightly lower than expected, Versace doesn't think this will change the timing of the rate cuts. He points out that job growth over the past six months has been strong, and wage data indicates that inflation is persisting. With a strong economy and persistent inflation, Versace believes there is no urgency for the Fed to lower rates anytime soon.
Discussing Powell's Fed speech
The focus then turns to Federal Reserve Chairman, Jerome Powell, and his upcoming speech. Versace suggests that Powell has the data on his side, which shows that the economy is growing above trend and inflation is sticking around. The February PMI data supports the idea that selling prices are increasing, and upcoming CPI and PPI data are expected to confirm this trend.
Versace predicts that Powell will acknowledge the strong economy and may even revise the Fed's economic projections upwards. While the market may not immediately respond positively to this news, Versace believes that the overall market sentiment has shifted towards optimism about the economy, which should lead to positive earnings growth.
US election and rate cuts timing
The conversation also touches on the limited window for rate cuts due to the upcoming US election. Versace agrees that the September meeting is too close to the election and the Fed doesn't want to be seen as influencing the outcome. Therefore, he expects the rate cuts to potentially happen in November or December, unless there is a significant deterioration in the economy.
He ends by advising viewers to have a list of quality companies ready in case there is a market pullback, which would offer good buying opportunities.
Overall, Versace's views suggest that the current economic data supports the Fed's cautious approach to rate cuts, and he expects Powell to deliver a positive message about the economy while being mindful of the election year. So, despite some recent concerns, it seems like there are reasons to be hopeful about the economy.
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