A Strategas survey reveals a shift in its clients' expectations regarding Federal Reserve policy.
While still anticipating two rate cuts in 2024, investors now look towards November and December rather than September, according to the firm's latest note. This aligns with Strategas' own forecast of two cuts this year, but they predict an earlier start in September.
The firm also highlights a potential dovish tilt in long-term views. Strategas reports a reversal in the rise of long-term rate expectations observed earlier in 2024, with investors lowering expectations by 25 basis points over the next 36 months.
This suggests that long-term yields could fall further than previously anticipated. However, Strategas cautions that further evidence of disinflation is needed before long-term expectations adjust more decisively.
The survey findings show investors expecting two rate cuts by year-end, without a September move, implying cuts at the November and December meetings.
There's increased uncertainty about the near-term path of rate cuts, but this is balanced by a more optimistic outlook on future inflation. Strategas said its clients are more hawkish than futures markets, which are currently pricing in three cuts by the end of 2024.
Overall, the Strategas survey suggests a cautious optimism among investors regarding the Fed's future actions. They anticipate two rate cuts this year, but with the timing potentially pushed back to the later months.