The Macro Trading Floor How To Trade The Fed Cutting Cycle
Sep 20, 2024
The discussion dives into the Fed's unexpected 50 basis point rate cut, revealing intricate dynamics and member perspectives. Historical parallels are examined to guide asset class strategies, with a keen focus on the unpredictable dollar. The implications of an imploding Chinese economy add to the urgent analysis of global markets. They also highlight the emerging importance of prediction markets over traditional economic forecasts and critique the conventional 60-40 portfolio model amidst rising inflation.
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An Ambiguous Cut
- The Fed's recent 50 basis point cut felt ambiguous, like Powell's decision rather than the committee's.
- Their projections and statements lacked cohesion, suggesting they're data-dependent and not in control.
Dollar's Uncertain Future
- The dollar's reaction to the Fed's cut is uncertain, as its typical weakening patterns aren't present.
- Global growth is sluggish, and the US isn't experiencing a unique shock, making the dollar's direction unclear.
China's Priced-In Pain
- China's economic struggles seem priced in, limiting their impact on commodity and cyclical currency rallies.
- While China's weakness creates a ceiling for these assets, it doesn't drive further declines.