Good Friday morning from your Hometown Lender,

There is no economic data to share today.

Bonds though, are again under a bit more pressure with the 10yr note at 4.24% from 4.16% on Wednesday. Why? Well, lots of speculation. First and foremost, despite Chairman Powell being upbeat (although non-committal) on when the first rate cut will appear, several Fed governors have been out this week (and today) banging the same drum that they need more evidence inflation is moderating.

Does that bring into question how many cuts we will see in 2024?

Maybe, but I think we should have become somewhat numb to this rhetoric by now. Additionally, the presumption is that the longer that President Biden stays in the race, the better the odds are for a Trump win. A Trump win (which I do see a lot of positives with), will (as he secures borders, reduces taxes, and makes imports more expensive to level the playing field for American goods and services), put pressure on prices and employment. This is all likely to push inflation higher.

We are seeing a lot of this concern manifest in the equity markets as well.

Major stock markets are all taking hits day after day and the VIX (volatility index) is increasing. The thought here is that larger cap stocks (the ones the Dow, Nasdaq, and S&P are filled with) will have a harder time navigating the new policies and that when the Fed does cut rates, the more nimble smaller companies that have debt will benefit more than larger companies will. That was a mouthful. So the playbook is that a win by either party will keep the Fed in a rate-cut mindset but a Trump win will likely slow down Fed cuts as other economic benefits are realized.

Next Friday brings the PCE, the Fed’s favorite inflation gauge.

The Fed meeting is just two days after that. That PCE report will go a long way to solidifying the Fed one way or another. Either the report comes in at or below estimates which gives the Fed freedom to act whenever they are ready or it comes in higher and we are on hold. I am currently in the corner that it will come in below estimates but do expect rates to continue to leak sideways until the report.

Stay safe, enjoy the weekend, and make today great!