US PCE Preview: Stock Market at Risk if Data Lags Swelling Rate Cut Bets
US PCE Preview: Stock Market at Risk if Data Lags Swelling Rate Cut Bets
By:Ilya Spivak
Stocks might take a step lower while the U.S. dollar mounts a rebound if PCE inflation data fails to catch up with the vast dovish swing in 2024 Fed interest rate cut expectations.
- Wall Street is loudly cheering as 2024 Fed outlook swells with rate cuts.
- PCE inflation data poses asymmetric risk amid ultra-dovish positioning.
- Stocks may fall as the dollar gains if bulls are left without fresh fodder.
A thunderous cheer rose on Wall Street as the Federal Reserve endorsed a round of interest rate cuts coming in 2024, validating months of eager speculation by investors. The bellwether S&P 500 stock index is on course to rise over 13% over two months, marking the sharpest rally in a year.
Markets vs. Fed on 2024 rate cuts: worlds apart
The depth of easing now priced into the markets appears vast. Fed funds futures reflect six 25-basis-point (bps) rate cuts on the menu, amounting to a 1.5% reduction. For its part, the U.S. central bank’s policy-steering Federal Open Markets Committee (FOMC) penciled in 75bps into December’s quarterly update of official forecasts.
The spotlight now turns to November’s edition of the personal consumption expenditure (PCE) inflation data, the Fed’s favored price growth gauge. It is expected to inch down to 2.8% year-on-year while core rate excluding volatile food and energy prices slides to 3.3%. Those would mark the lowest readings since March and April 2021, respectively.
Stocks at risk, U.S. dollar may rise on asymmetric PCE data risk
With a vast easing program already in the cards, the likelihood of a further dovish shift in expectations seems minimal. That makes for asymmetric volatility risk as the PCE print comes across the wires, with the markets likely to be far more responsive to an upside rather than downside surprise.
In fact, even a broadly in-line outcome might catalyze markets to move, if only by its passing. If the data doesn’t catch up with the most recent round of dovish positioning, some corrective unwinding might be triggered. Such an adjustment is likely to weigh on stocks while the U.S. dollar rebounds. An upside PCE surprise could sharply amplify these swings.
Ilya Spivak, tastylive head of global macro, has 15 years of experience in trading strategy, and he specializes in identifying thematic moves in currencies, commodities, interest rates and equities. He hosts Macro Money and co-hosts Overtime, Monday-Thursday. @Ilyaspivak
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.