Goldman Sachs The Markets
What Fed cuts will mean for markets
Aug 2, 2024
Josh Schiffrin, the Global Head of Trading Strategy at Goldman Sachs Global Banking & Markets, joins Chris Hussey to dissect the implications of potential Federal Reserve rate cuts. They delve into the Fed's considerations under rising unemployment and inflation trends. Schiffrin explains how these cuts could reshape both equity and bond markets, especially amidst turbulent conditions. The discussion highlights the significance of labor market data and emphasizes the U.S. consumer's role in sustaining global economic stability.
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Quick takeaways
- The Federal Reserve is likely to cut interest rates soon, influenced by rising unemployment and recent inflation improvements.
- As interest rates decrease, both equity and bond markets are expected to benefit, despite a complex and evolving investment landscape.
Deep dives
Impending Rate Cuts by the Fed
The Federal Reserve appears poised to cut interest rates, with indications that it may occur as early as September. Recent statements highlighted the rise in unemployment and improvements in inflation, suggesting that the economy is stabilizing. With the current policy rate at approximately 5.3%, a decrease seems warranted given inflation has dropped to about 2.5%, and the labor market has shown signs of rebalancing. The Fed's approach will depend on incoming data, specifically looking to see how much the labor market continues to weaken, which could potentially accelerate the pace of rate reductions.
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