“Stronger-than-expected economic data means that there is no rush for the Fed to start cutting interest rates. We expect the first Fed cut to occur in June.”
- Unlike at the end of 2023, global equity and bond markets have diverged since the beginning of 2024.
- While US economic growth remains strong, the pace of disinflation has become more gradual.
- This combination of stronger-than-forecasted growth and inflation has led markets to revise their Fed rate cut expectations.
After moving in the same direction last year, global equity and bond markets have begun to diverge in 2024. Stocks have extended their gains, while bonds have suffered due to stronger economic data, which has increased uncertainty about when the Fed will begin cutting rates
Indeed, US macro data remained strong this week. A 2nd estimate of GDP growth for the last quarter of 2023 showed a marginal downward revision, but still sound consumption. Recent inflation gauges also confirmed that the transition towards lower inflation is decelerating.
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