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As we approach mid-September 2024, the financial landscape is poised for significant shifts. The Federal Reserve is expected to implement a rate cut of at least 25 basis points in the coming week. While some speculate on a 50 basis point cut, we caution against hoping for such an aggressive move. A 50 basis point reduction would suggest the Fed is privy to troubling economic data, potentially signaling a darker outlook for markets, corporate earnings, and overall economic activity.
The consensus among astute market observers, including Torsten Slock of Apollo, who has demonstrated remarkable accuracy throughout the year, suggests we're nearing the end of the rate hike cycle. Barring an unexpected inflation shock, which seems unlikely given the consistent decline in energy prices, we anticipate rates will settle into a natural range of 3% to 3.5%. This projection aligns with the U.S. economy's sustainable long-term growth rate of approximately 2% annually.
Several factors are driving this trend…
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