Rate cuts are not good for stocks. That's probably the biggest misconception. You can see how SP500 dropped after rate cuts begin (or signaled by the FED) in November 2000 and in July 2007.

Rate cuts mean economy is falling off the cliff which is not good for stocks. So when it begins, you don't want to exposure to stocks. Get long term bonds.

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Have to respectfully disagree on this one.

Jpow & co have been clear that rates will be higher for longer. I think they mean it - they realize they screwed up w/ "transitory inflation" and that both their credibility & faith in USD is at stake.

For awhile I didn't think they'd be able to keep hiking rates - but here we are at 4.5% FFR and the markets seem to be handling it.

The Fed doesn't care about home prices - now that MBS are backed by the gov't, its the taxpayers that will bail out any defaulted loans.

Increased interest payments on federal debt aren't an issue as long as wage inflation continues - the increased income tax reciepts make up for it.

I believe the Fed wants to stabilize inflation around 4-5% - they just can't admit that. If they did, interest rates would blow out. Look at the long end of the yield curve: the bond market is slowly digesting that higher inflation & interest rates are here to stay.

P.s. 6mo T-bill currently yielding 5.2%

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Of the 5 possible scenarios you listed that would justify a Fed pivot (and rate cut), which do you think is most likely?

I think #3 will happen first followed by #4.

I am not sure if any of the others are likely in 2023.

What do you think?

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Hi, I forgot to join the telegram when you first sent out the invite link. Could I possibly get a new one?

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