Macro Horizons
Stormy January
Jan 5, 2024
The hosts discuss the recent payrolls report and its impact on the market, forecast higher rates on two-year and ten-year bonds, evaluate the market's pricing of the Federal Reserve's expectations in the first quarter, discuss potential reasons behind the Fed's dovish stance, and address challenges in bringing core inflation back to target.
20:15
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Quick takeaways
- The stronger than expected payrolls report shows the resilience of the labor market despite uncertainties and market cheapening suggests a waiting pattern for greater clarity on monetary policy.
- The anticipation of higher rates in the first quarter is fueled by the Fed's reluctance to bring forward rate cuts, concerns about supply and digestion, and projections of two-year yields reaching 4.35% and 10-year yields falling between 420 to 440 basis points.
Deep dives
Stronger than expected payrolls report
The most interesting development from the week was the stronger than expected payrolls report. Jobs growth beat expectations and the unemployment rate remained unchanged at 3.7%. This demonstrates the resilience of the labor market despite uncertainties. The market cheapened after the report, indicating a waiting pattern for greater clarity on monetary policy.
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