Hi everyone!

I used to do this series monthly but I haven’t touched it in a while because the markets were so boring.

I thought we were essentially just waiting for the US Fed to reduce interest rates, but as everyone knows, the markets are just completely bonkers at the moment and I want to look into why…

… let’s find out together!

So firstly we can see that interest rates has been pretty steady (5.50%) the last few months…


I didn’t realise, but the US Fed hasn’t changed interest rates since July last year…


That black line above is the volume of federal fund transactions… essentially what banks borrow from the US Federal Reserve, and it’s been really pretty steady since August last year… not trending up or down.

This leads me to wonder if the US Fed even sees a need to lower interest rates… the Fed meets in a couple of weeks on March 20th, and then again on the 1st of May. Let’s see if the experts are predicting a change…


So the vast majority of degen gamblers over at Kalshi are confident rates will not rise or fall in March. Clicking through the various months, at this point, there is less confidence about staying above 5.25% in May and in June and July it looks like people suspect it could go down to 5% or 4.75%.

Similar story over at CME Fedwatch (this is the prediction for June 2024):

It looks like the experts don’t expect the US Fed to drop rates anytime soon. The reason this is interesting to me is that with interest rates as high as they’ve been since really 2001 is that you would see a lack of investment for both companies and individuals.

The US Fed raised interest rates initially to counter the quantitative easing measures of the supply chain disruption of the pandemic, when prices rose dramatically (less supply) and people were getting paid more (higher demand in the tech sector). The US Fed is unlikely to drop rates until they see wages and employment levels fall.

Certainly we’ve seen so many layoffs in the tech sector, and the US housing market has been super quiet (relative to pre-pandemic levels). The general feeling out in the world is that prices are still really high… but inflation and CPI doesn’t really seem to reflect that…


I seriously thought the US was heading for a recession, and now I’m not so sure… but I don’t truly understand why just yet.

It’s hard to think a recession is looming in the minds of many while the stock market and crypto are heading towards those all time highs…



Even while the US Fed is letting assets expire off its balance sheet:


Honestly, the US macro economy is looking pretty strong even with these high rates. The unemployment rate is low, productivity is up, more jobs keep getting added, average pay is super steady…


The labour force participation rate isn’t quite at 2019 levels, but it’s really not that far off…


… I just don’t really see any reason for the US Fed to change much at all.

That means that the housing market in the US will remain just limping along. No one wants to sell because no one wants to buy while interest rates are high (relative to the last two decades). We might see US housing transactions start up again in May or June, purely because people who having been waiting for interest rates to come down might just pull the trigger at the slightest drop. We’ll have to see.


I’d expect 2024 to be even lower for house sales than 2023… even with Return to Office mandates might have forced some people to sell and buy when they weren’t expecting to.


I’d expect the S&P 500 to keep increasing for probably the next year or so. I think there will be a surge on new money flowing in June if the US Fed does drop rates by 25 points.

With the BTC ETFs, we’ve essentially hit a crypto bull market… so I’m guessing BTC will keep surging upwards in price until about June, and then alts will go nuts for a few months. It’s probably going to get very wild and happen extremely quickly, which makes me nervous.

I’m sure this will be an unpopular opinion, but I think the US Democrat party will keep the presidency, keep the senate and flip the house in November, which means we’ll see increased government infrastructure spending. There is a lot of the US infrastructure that is falling apart (bridges, railways, roads, pipes, etc) that affects productivity. This includes the transition to clean energy, which is getting significantly cheaper and so companies will profit…. which means higher share prices.

I think the pendulum will swing the other way in 2025, as the US hits a bear market… but I have no idea when that might be… it’ll be when the bulls run out of steam.

So, what do you think? Am I right? Am I very wrong?

Thanks for reading!


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