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In our latest podcast episode, we talk about the Federal Reserve's recent stance on interest rates, sparked by Federal Reserve Chair, Jerome Powell's remarks this week. Contrary to the anticipated rate cut in March, Powell suggested such measures might not be immediately necessary, stating, “We don’t have a growth mandate.”

The Fed’s comments have led to a recalibration of market expectations, underscoring the ongoing and significant influence that the Federal Reserve's outlook has on financial markets.

Our in-depth discussion touches on the broader economic context, particularly the U.S. debt situation. With the national debt at a staggering $34 trillion, we explore the challenges of refinancing a significant portion (~30% in 2024) of this debt in a potentially higher interest rate environment. This scenario is of interest (pun intended) given the recent uptick in Treasury borrowing costs and yields, which have risen from historically low levels in the past few years.

Our view: The anticipation of future rate cuts, even if delayed, remains a key factor in forward-looking stock markets, affecting stock volatility, bond yields, and investor sentiment.

Watch or listen to the full episode for more on the current economic and financial landscape. We spend time on the critical role of interest rates, market expectations, and the broader implications of the U.S. fiscal situation. Specifically: a projected one trillion dollars of interest payments currently expected in 2024.

Listen to this episode

Time Codes … Chapters:

00:16 … Fed Comments

01:52 … Pen Mightier Than Sword

03:22 … When Lower Interest Rates?

04:13 … Bi-Monthly Treasury Debt Auctions

06:28 … The Costs of Borrowing

09:10 … Treasury Credit Card

10:40 … The Risk-Free Rate

13:08 … Markets are Forward Looking

14:18 … After All Time Highs

16:01 … Politics 2024

16:55 … Price Swings Tend to be Clustered

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Related article:
Pen Mightier than Sword.

Charts and Graphs

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This discussion was recorded on February 1st, 2024, with Vector’s Jason Ranallo, CFA® and Communications Director Ezra Firkins.

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