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How soft is a soft landing？

Expectations are too high already
 
   
     
   
 
SEPTEMBER 12, 2024
   
Hey y’all,

I’ve talked recently about my fears over the next Federal Reserve meetings, which take place next week on the 17th and 18th. 

I worry that expectations are out of balance. I think a 0.25% rate cut is already priced into the market, but many traders expect a big bounce from that news.

And my true concern is that anything less than a 0.50% rate cut, which I still view as unlikely, will result in negative pressure in the market.

We see this kind of trap a lot — recently, NVDA reported stellar earnings. But because they weren’t supercalafragalisticexpialadoshus earnings, the markets sold off.
 
 

If expectations are set too high and then disappointed, we can see some really disastrous fallout in the market — both because of the resultant selloff and then the ensuing panic-selling from all the traders who went long and got caught short.

This is something to be very careful about next week. But I think the potential ramifications extend much further than that. 

Right now, if we glance at the Fed Rate Futures expectations, I see a worrying picture…
 
 

Right now, conditional meeting probabilities are pricing in the potential of NINE rate cuts between this year’s September meetings and next. 

Of course, most mainstream traders are not thinking that far out. But institutions are.

And clearly, many investors see at least a path to a consistently healing economy over the next year, with rate cuts coming along the way.

I don’t know that we’re there right now.

Initial rate cuts hardly ensure that future rate cuts are coming. Chairman Powell and the Fed will still have to consider other economic indicators. Inflation is high, and unemployment is growing…
 
 

I’m not saying the economy is in disaster mode by any means. A soft landing seems genuinely possible.

But that doesn’t mean we’re going to have an uninterrupted path of progress. And the fact that people are pricing in a linear return to earth concerns me.

It might not mean anything.

But it’s something I have my eye on right now.

To your prosperity,

Stephen Ground
Editor-in-Chief, ProsperityPub

P.S. Whether the Fed cuts rates a quarter point, a half point or not at all, Nate Tucci tells us the Fed meeting will create market volatility regardless — and he’s going LIVE today at 3:30pm Eastern to show us how he plans to harness that volatility! Register your spot now!
   
 
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