Too fast ?
Jan 09, 2024
As shown yesterday, our first investment theme for 2024 is the normalisation of interest rates. With falling inflation numbers in Q4 last year, financial markets have been quick at discounting rate cuts by the central banks. While we believe that central banks have indeed done their job and will start cutting rates in 2024, we are however less optimistic than Mr Market about the speed of the cuts than what is currently discounted in the market. For the US for example, forward rates are implying no less than 6 interest rate cuts this year. The Fed is currently communicating looking for 3 cuts of 25 bps. Financial markets appear to be right about the direction of interest rates but too optimistic about their magnitude and speed. In the short run that may lead to some volatility. Medium term however, the fact that central banks appear to be done with their rate hikes will be supportive to markets.