BlackRock's Li: Market "A Bit Too Overly Hopeful" on Fed Cuts

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Bloomberg Jan 4 14:10 · 8051 Views

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  • 00:00 Wait, when you look at the bets again, as Mana said, they were paired back for cuts in March.
  • 00:04 Does that just need to evaporate?
  • 00:05 Is there a chance that the Fed is really going to be cutting in March?
  • 00:09 Well, we don't think the Fed is going to cut
  • 00:11 in March, and market pricing for six cuts
  • 00:15 for the entirety of 2024 is a bit too
  • 00:18 overly hopeful for the feds to come to the rescue of the economy.
  • 00:23 So we do think that this year is the year of the rate cuts maybe starting in Q2 instead of March
  • 00:30 and maybe not
  • 00:31 as many as what market seems to be hoping for.
  • 00:34 So right now we're talking about more than five cuts, close to six cuts, but maybe closer to three, which is actually what the Fed is signaling themselves is what we are eventually going to get.
  • 00:45 So in terms of my take away from the FOMC minutes last night, what is interesting is that there was a note towards financial conditions which we didn't get in December, which to me reads a bit on aggregate more hawkish compared to the read back in December.
  • 01:01 But the big picture is that this year is the year of rate cuts and we have
  • 01:06 become incrementally
  • 01:08 more constructive on duration versus through the course of last year.
  • 01:12 I want to lock in some of those higher rates at this levels because
  • 01:16 yields are coming down, policy rates are coming down.