Welcome Back,

Market Headlines 👀 

• Boeing (BA) CEO steps down as the company faces several 737 issues in recent times.

• FTX stake in AI startup Anthropic backed by Amazon is being sold to new investors.

• Truth Social (DJT) Trump’s social media company will begin trading in the markets under its DJT ticker tomorrow.

• Apple (AAPL) will launch its Vision pro headset in China later this year.

• European Union has launched a new probe under the ‘digital market tech’ provision against Meta, Alphabet and Apple.

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Recap Around the Street 🧠

The Fed was dovish on multiple counts last week, signaling that they really want to cut rates.

Still 3 Rate Cuts Despite Raising Growth and Inflation Forecasts: The updated Dot Plot maintained the median dot for 2024 at 3 cuts. This is despite the Fed raising its 2024 inflation target (2.6% vs. 2.4% in December for Core PCE) and growth target (2.1% vs. 1.4% in December for Real GDP). When asked about this dovish mix of higher growth and inflation and rate cuts, Powell said, “we continue to make good progress on bringing inflation down” and that financial markets “believe we will achieve that goal” [of 2% inflation]. Someone should show him 5 Year Breakeven inflation rates jumping to a new 1-year high of 2.48%.

Comfort With or At Least No Push Back Against Easy Financial Conditions: When asked about the recent easing of financial conditions, Powell expressed zero concern and even zero acknowledgment that broad measures of financial conditions have eased back to 2021 ultra-easy levels. He instead said, “we do think that financial conditions are weighing on economic activity,” and discussed peripheral labor data that has slowed recently. This gave the green light to risk assets to rally, as Powell does not see these easy financial conditions as a risk to achieving the 2% inflation target (unlike the summer of 2022, when Powell talked down markets that had rallied in hopes of a policy pivot).

A High Bar for Hikes/Hold, a Low Bar for Cuts: Powell signaled a much higher bar for further rate hikes and even a hold of current policy rates, compared to a lower bar to deliver on cuts. This is seen clearly in the revised forecasts for higher growth and inflation, combined with the continued expectation for 3 cuts. For markets, this appears to be a “have your cake and eat it too” moment, meaning risk assets can enjoy higher growth and still get rate cuts from the Fed, while also knowing that the Fed is willing to cut rates swiftly if growth were to soften. Said another way, “tails I win, heads you lose.”

A Plan to Slow Quantitative Tightening (QT) and Keep Liquidity Ample: Powell discussed the emerging plan to begin to slow Quantitative Tightening (the shrinking of the Fed’s balance sheet) in order to keep liquidity ample. This is celebrated by liquidity-sensitive risk assets, which struggled in years like 2022 and 2018 when the Fed did allow liquidity to become scarcer.

(Contributed by Cameron Dawson, CIO at NewEdge Wealth).

Market Preview 🎞️

• Tuesday, March 26th: Conference board consumer confidence; durable goods;

• Wednesday, March 27th: MBA mortgage applications

• Thursday, March 28th: Weekly jobless claims; Q4 final GDP; University of Michigan sentiment and inflation expectations; Pending home sales

• Friday, March 29th: Personal income and spending (PCE) data

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That’s all for today, folks! We’ll be back around the same time Thursday with a curated list of important news, economic data and market highlights. 

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