U.S. equity and government bond markets soared Wednesday on signs the Federal Reserve has pivoted from raising interest rates to cutting rates. The S&P 500 ($SPX) (SPY) and Nasdaq 100 ($IUXX) (QQQ) rallied to 23-month highs today, and the Dow Jones Industrials ($DOWI) (DIA) climbed to a record high. The 10-year T-note yield fell to a 4-1/2 month low today at 3.884%.
The markets are now pricing in six quarter-point rate reductions in 2024 by the Fed, twice the number that FOMC members forecasted in the Fed dot-plot on Wednesday. Goldman Sachs said, “The FOMC delivered a dovish message at Wednesday’s meeting,” which prompted Goldman to revise its outlook for the Fed. Goldman Sachs now expects the Fed to begin cutting rates by 25 bp in March and continuing in May and June, with further cuts every quarter until the fed funds target range falls by an overall 2 percentage points to 3.25%-3.50% from the current 5.25%-5.50%.
