The Federal Reserve’s latest moves have created some uncertainty and confusion in the markets, and as we know, uncertainty creates volatility. While Fed Chair Jerome Powell hints at 3 potential rate cuts in 2024, Atlanta Fed President Rafael Bostic sees only one cut on the horizon. This disharmony among Fed members contributes to market volatility.
Adding to the uncertainty is the global economic slowdown. Many countries are entering or facing recessions, and some central banks have already enacted surprise rate cuts. This puts downward pressure on US interest rates.
What I’m watching this week…
The spring home-buying season is underway, with inventory increasing and interest rates stabilizing. Pent-up demand is surfacing, providing opportunities for buyers. While sharp interest rate declines aren’t expected without surprise recession signals, there’s still a chance for savvy buyers to take advantage of less buyers in the market before rates potentially climb higher.
Since Friday was a holiday in the bond market and yet the Fed’s favorite inflation, the PCE Index, was released, we didn’t get to see market reactions until Monday to the all-important inflation data, which wasn’t favorable for rates. The 10-year Treasury ended over 4.32 percent, an important level signaling a bias toward higher rates.
Throughout the week, Fed members will weigh in on the economy and the potential for rate cuts. The main event, however, is Friday’s March Jobs Report. Weak numbers could fuel a June rate cut, while strong numbers increase uncertainty and the risk of higher rates.
As for the Jobs Report, a 200,000 rise is the call for new job growth in March versus 275,000 in February which was higher than expected but included a sharp downward revision to a still strong 229,000 in January.
Average hourly earnings in March are expected to rise 0.3 percent on the month for a year-over-year rate of 4.1 percent; these would compare with February’s rates of 0.1 percent on the month and 4.3 percent on the year. March’s unemployment rate is expected to hold unchanged at February’s 3.9 percent, which was higher than expected.
Conflicting Fed signals, global economic concerns, and key economic data releases create significant market uncertainty. I’ll be keeping a close eye on this Friday’s Jobs Report. Stay tuned to see how the market responds to this week’s pivotal economic events.
