Unthought Known Path of Rate Cuts with Luke Gromen

9 snips

Sep 20, 2024

In this discussion, Luke Gromen, an economic trends expert, shares his bullish outlook on equities despite recent Fed rate cuts. He explores the implications of rising interest expenses for the U.S. government and analyzes the current state of the Treasury market. Luke also highlights historical precedents for significant rate cuts, predicts gold and Bitcoin's performance amidst a weakening dollar, and addresses the sustainability of fiscal deficits and their impact on GDP. The conversation offers valuable insights into future market dynamics.

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INSIGHT

U.S. Treasury Is The Stressed Institution

Luke Gromen says rising interest expense is squeezing the U.S. government and limiting policy options.
He calls the Treasury the stressed financial institution, not banks, due to sovereign debt dynamics.

INSIGHT

Deficit And Boomers Mask Low-End Weakness

Gromen argues large fiscal deficits and wealthy older cohorts are masking weak low-end demand.
He calls it a YOLO spending binge by people 55+ that props headline GDP and markets.

INSIGHT

Recession Could Blow Deficit To 13–14% GDP

A true recession would spike the deficit toward 13–14% of GDP and break confidence in long-term sovereign debt.
Gromen says bond markets would no longer buy long-duration U.S. paper at those deficits.

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Dan Nathan and Danny Moses discuss the ongoing bull market, with insights into the S&P 500's new highs and the NASDAQ's performance. They delve into the implications of the Fed's recent interest rate cut, Chair Jerome Powell’s press conference, its impact on the economy, and the potential for more rate cuts amidst discussions of a soft landing. The episode covers the recent trends in tech stocks, banks' performance, and market strategies as hedge funds recalibrate their positions.

Guy Adami and Danny Moses welcome back Luke Gromen of FFTT, LLC to discuss his bullish stance on equities despite the Federal Reserve's recent interest rate decision and its implications for the market. Luke explains the mechanics of rising interest expenses for the U.S. government, the impact of Federal Reserve policies, and the current state of the Treasury market. They delve into historical precedents for 50 basis point cuts and their effects on the markets, current fiscal deficits, and the broader economic outlook. Additionally, Luke predicts the performance of gold and Bitcoin, emphasizing their roles in the face of weakening dollar dynamics, and potential future market scenarios. The discussion also touches on the sustainability of the fiscal deficit's impact on GDP, the demographic influences on the economy, and potential risks from future political and fiscal decisions.

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On The Tape is a weekly podcast with CNBC Fast Money’s Guy Adami, Dan Nathan and Danny Moses. They’re offering takes on the biggest market-moving headlines of the week, trade ideas, in-depth analysis, tips and advice. Each episode, they are joined by prominent Wall Street participants to help viewers make smarter investment decisions. Bear market, bull market, recession, inflation or deflation… we’re here to help guide your portfolio into the green. Risk Reversal brings you years of experience from former Wall Street insiders trading stocks to experts in the commodity market.

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