Combined from Eddie Financial.
The better the economy, the slower the rate cut
Timing for position adjustment: Due to the overall good economy in the United States, the expectation of rate cuts continues to be postponed, which is a good thing!
Global funds will continue to flow back to the United States, mainly because the monetary policy implemented by the Federal Reserve only serves the United States itself, which the United States calls 'advantage'. For most other countries (developed countries + developing countries), they will be forced to be constrained by the tightening monetary policy.
Small and medium-sized companies in the United States may be constrained by high financing costs, but for large companies with global operations in the United States, it will not cause much harm or negative impact.
Strong Economy
In March, multiple macroeconomic data exceeded expectations, with the GDPNow model predicting a quarter-on-quarter real GDP growth rate of 2.8% for the first quarter of 2024 in the United States: obviously, from the currently published labor market, private real estate, manufacturing and other macroeconomic data, it shows that the economy is very strong, with almost no possibility of a recession.
Leading indicators such as the University of Michigan Consumer Confidence Index, the U.S. Sentix Investor Confidence Index, the Chicago Fed's National Financial Conditions Index, the St. Louis Fed's Financial Stress Index, PMI new orders, etc., all indicate a thriving and prosperous U.S. economy.
Based on the Atlanta Fed's non-mainstream GDPNow model for near-term forecasting (Nowcast), it shows a quarter-on-quarter real GDP growth rate of 2.8% for the first quarter of 2024 (as of April 15).
With the probability of a short-term rate cut decreasing, but the economy remaining strong, the logic for medium to long-term growth remains unchanged: against the backdrop of strong economic data, the short-term window for a rate cut by the Federal Reserve has closed, expectations for a loose financial environment have tightened, and the yield on the 10-year U.S. Treasury bond has risen.
Postponement of Rate Cuts
After the release of multiple economic data this month, the Fed funds rate futures show that the probability of a rate cut in May is only 5%, in June it is 23%, in July it is 48%, in September it is 72%, and in December it is 89%. The current market probability is that there is likely to be only one rate cut in 2024.
In the future, we will focus on whether other economic data undergo significant changes and the Fed's interest rate meeting on May 1st. Until there is no significant change in the data or guidance from Fed officials, we expect the equity market to be volatile in the short term. In the medium to long term, the fundamentals of the economy are the core key to determining market trends.
Strategy
In the past, loose expectations drove the S&amp;P 500 to rise for 5 consecutive months. The current tightening financial environment is an undeniable fact. Funds within the market are being reallocated, and it is unlikely that there will be an index-level beta market in April-May. The first quarter earnings reports of U.S. stocks have been fully released, and it is expected that funds will be allocated towards large companies with overall earnings exceeding expectations.
Recommendations: Focus on assets with overall earnings exceeding expectations such as Goldman Sachs (GS.US), the &#34;Big Seven&#34; of U.S. stocks, and gold (GLD.US)

Due to the overall strong US economy, the expectation of interest rate cuts continues to be postponed, which is a good thing!

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Slower interest rate cuts are better for the long-term outlook of the US stock market