This month, Jason Weaver discusses the end of the Fed. cycle, cash on sidelines and picking spots.
End of Fed. Cycle
The Fed has been raising rates since March 2022 to combat inflation in the US
Quarterly, the FOMC updates their economic projections and expectations for the fed funds rate.
Fed officials have paused further rate hikes and forecasts show they could cut rates in 2024.
The median FOMC projection is 3 rate cuts in 2024
The debate is around the timing, some think as early as March. And, how many cuts, the market expects 4-5 cuts 0.25% cuts this year
Cash on Sidelines
In Q3 2023, total money market fund balances reached an all time high of $6.1 Trillion.
High money market balances can be attributed to higher yields and economic uncertainty
Since Oct. 2022, equity funds had about $240B in outflows while Money Markets had about $1.1T in inflows
The large amount of cash should mean future stock market declines will be short-lived as investors will look for higher returns as yields decline
Picking Spots
“Picking Spots” will be important in 2024 as the economy and market face various potential challenges
Trade wars, China, politics, possible recession, and the long lags of monetary policy
Investors will want to stay disciplined and diversified facing these potential headwinds
