From Yahoo Finance:
....A late-day slide in equities shattered the calm that prevailed throughout most of the trading session, with the S&P 500 closing near session lows. The Dow Jones Industrial Average notched its worst weekly drop since September. Treasury 10-year yields climbed, approaching 3.6%.
In the run-up to the Fed meeting, all eyes will be on Tuesday’s consumer inflation print — which is forecast to show inflation, while much too high, continued to decelerate. US central bankers, including Chair Jerome Powell, have been signaling a slowdown in the pace of rate hikes while stressing borrowing costs will need to keep rising and remain restrictive for some time to beat inflation.
“Bottom line: the Fed has already come to terms with the fact that they are likely risking a recession, to anchor inflation longer-term,” said Don Rissmiller at Strategas. “The job is not done. Rate hikes can likely slow down to 50 bp, but we are still looking at policy tightening (and staying tight) in 2023.”
The Fed is set to keep rates at their peak throughout 2023, dashing hopes markets have priced in for rate cuts in the second half, according to economists surveyed by Bloomberg.
The Federal Open Market Committee’s median projection is expected to show the benchmark peaking at 4.9% in 2023 — reflecting a 4.75%-5% target range — compared to 4.6% seen in September. That would deliver a hawkish surprise to investors — who currently bet rates will be cut by a half percentage point in the second half of next year, though they too see rates peaking around 4.9%. The current range is between 3.75% and 4%.
While many investors are impatient for the Fed to deliver its last rate hike, history shows they should be wary of doing so while inflation remains elevated, according to Bank of America Corp. strategists.
An analysis by Michael Hartnett showed that stocks outperformed after the Fed stopped increasing rates during periods of disinflation in the past 30 years. However, during the era of high inflation in the 1970s and 1980s, equities had fallen after the last hike, they wrote. In the current cycle, they expect the Fed to raise rates for the last time in March 2023.
After analyzing 15 economic downturns going back to 1929, strategists at Bloomberg Intelligence found a strong link between the length of recessions and the time it took the S&P 500 to reclaim its previous high....
....MUCH MORE
