The Four Pillars of Macro with Andy Constan
Excess Returns
00:00
Is the Short-Term Interest Rate Market Pricing Different From the Equity Market?
The market until early until last week had priced 200 basis points of cuts once we hit terminal rate in March or June rapidly. That to me is unusual, particularly given that recessions are bad for equities and corporate credit. Despite interest rates falling, earnings drive equity prices lower. And so the disparity between what the short-term interest rate market is pricing and the equity market is pricing is pretty unusual in my view. It creates both opportunity, but also a fair amount of concern that this connect is going to shift fairly rapidly.
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