Fidelity on sticky inflation, and only limited Fed cuts - "market is like a spoiled child"

[Nighthawk]

Fidelity Investments commented on their outlook for the Federal Open Market Committee (FOMC) and equity markets in 2024.

On the Fed:

• “A few rate cuts make sense because inflation has fallen. I think it’s likely to be sticky at around 3%”
• “The market is like a spoiled child. It gets a few and it wants more, and that’s a very typical situation that we’re finding ourselves in right now."

On the equity market, Fidelity is bullish, but wary:

• interest rate cuts will keep the economy in a ‘goldilocks’ scenario
• If the 10-year Treasury note yield remains between the 4% and 5% level, the stock market “will be okay,”
• “The open question I think is one where if we see a rotation from The Magnificent Seven to everything that’s been left behind, and I do think that that is very likely, what kind of absolute trend does that produce?,”
• “When 30% of the market gets rotated into all the cats and dogs that are on the 70% side, how strong can the index actually be?”

 

[2rosy]

Most people don't care about rates of change. They look at the absolute number. So even if inflation goes from 9% to 3% that 3% is off a base that is 9% higher.