Everyone is asking the wrong question about the Fed.

4 months ago
33

Everyone has been debating whether or not they’ll cut in March and just how many rate cuts will happen this year.

Yet no one can actually explain why that matters.

It’s as if people are playing roulette like is done if a business will put out .001 or .002 in a given 90-day period.

What matters for stocks is the long end of the currently inverted yield curve, of which a matter of 6 weeks has virtually no effect.

What ultimately will matter is what the neutral rate is.

The fed’s dot plot indicated the neutral fed funds rate is around 2.5%, but a very heavy bias to it being higher than that.

When discussing the lack of effect on the economy after the rate increases, Powell begged the question: “what does that tell you about the neutral rate”

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