FOMC Members Have A Wide Range of Opinions as To How 2024 Will Play Out
Fed Funds: Two FOMC members see the Fed Funds rate unchanged in 2024. One member is below 4.0%. Most members are between 4.25% and 5.0% for 2024 Fed Funds.
Real GDP: FOMC members estimate a Real GDP range of 0.8-2.5% for 2024.
What the Fed is not telling you:
The economy is weak;
The Bond market’s easing as a result of the Fed halting rate increases could enable CPI to accelerate, especially if the Fed maintains QT’s plodding pace or stops QT altogether;
The Fed will have its Fed Funds Rate at 2% in a nanosecond if unemployment gets into the 5% range;
Core CPI won’t be at 2% anytime soon. By definition the Dollar will lose at least 2% of its purchasing power each year in perpetuity (this after record Dollar devaluation over the 2H 2020 - 1H 2022 period). The more the Fed eases, the more Gold and other commodities look attractive relative to the Dollar.
Given this setup, Bonds will rally. Corporate debt makes sense as it hedges equity exposure and depending on the issue, may offer a real rate of return. That said, tread carefully with High Yield debt exposure. Understand the underlying asset. Much of what is rated Investment Grade is actually High Yield in my view and many High Yield issues will suffer defaults next year.
