On Wednesday, Macquarie made adjustments to its Federal Reserve forecast following the release of Consumer Price Index (CPI) data on Tuesday. The brokerage now anticipates a more hawkish stance from the Fed, with expectations for only one rate cut of 25 basis points in 2024, revised from the previously forecasted 50 basis points. This sole reduction is projected to occur in December.
The firm also suggested that there is an increasing likelihood that the Fed may not implement any rate cuts until 2025. For 2025, Macquarie maintains its prediction of an additional 50 basis points in cuts. Consequently, the forecast for the end-of-year federal funds rate in 2025 has been increased to 4.63%, up from the earlier projection of 4.38%.
Macquarie's revision comes in the wake of strong economic indicators in the United States, including robust jobs and real GDP growth, coupled with an unemployment rate below 4%. The brokerage noted that it was already challenging to justify policy easing in the short term against such a backdrop.
The Federal Open Market Committee (FOMC) had previously understated the rise in core inflation during January and February. However, Macquarie anticipates that a third consecutive month of solid inflation figures will prompt the FOMC to reevaluate their expectations for the inflation trajectory. The updated forecast reflects Macquarie's analysis of the recent CPI data and its implications for future Fed policy decisions.
InvestingPro Insights
As Macquarie adjusts its Federal Reserve forecast in light of recent CPI data, investors are closely monitoring market indicators and performance metrics to better understand the potential impact on their portfolios. Here are some insights from InvestingPro that may provide additional context:
InvestingPro Data shows that the SPDR S&P 500 ETF Trust (SPY (NYSE:SPY)), a fund that seeks to provide investment results that correspond generally to the price and yield performance of the S&P 500 Index, has a current Market Cap (Adjusted) of $522.36B and a P/E Ratio of 6.22. These metrics suggest a strong market presence and a potentially attractive valuation for investors looking at the broader market as an indicator of economic health.
Additionally, the SPY has experienced a Revenue Growth of 8.56% over the last twelve months as of Q4 2023, indicating a solid performance amidst economic uncertainties. This growth, coupled with a Gross Profit Margin of 100% for the same period, reflects the fund's ability to maintain profitability, which is a key factor for investors to consider in the current economic climate.
InvestingPro Tips for the SPY highlight that the fund has raised its dividend for 14 consecutive years and has maintained dividend payments for 32 consecutive years, showcasing a consistent return to shareholders. Moreover, the SPY is trading near its 52-week high, which can be a sign of market confidence.
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