Forward Guidance
Kevin Muir: The Market Has Priced In Too Many Fed Cuts Since Government Money Printing Will Keep Nominal Growth High
Jan 14, 2024
Kevin Muir, veteran trader and publisher of The Macro Tourist newsletter, discusses the U.S. fiscal deficit, buy-write ETFs, and reasons why he is bullish on inflation breakevens and Japanese equities. He believes inflation surprises will be consistently to the upside and talks about his excitement for Harley Bassman’s new mortgage ETF.
01:21:33
Episode guests
AI Summary
AI Chapters
Episode notes
Podcast summary created with Snipd AI
Quick takeaways
- The market may be overestimating the extent of rate cuts by the Federal Reserve due to a significant skew towards lower rates in options pricing on short-term interest rates.
- Political considerations, such as the upcoming election, may partially explain the Federal Reserve's dovish stance and reluctance to adhere to the market's expectation for significant rate cuts.
Deep dives
Bond market expectations of rate cuts are likely overestimated
The bond market is currently expecting multiple rate cuts from the Federal Reserve. However, the market may be overestimating the extent of these cuts. The pricing of options on short-term interest rates shows a significant skew towards lower rates, with higher probabilities assigned to cuts of 7% or more compared to cuts of 2% or less. This suggests that the market is overly bearish on interest rates, and the actual rate cuts may not be as drastic as expected.
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
