The market implied rate (from swaps/forwards curves) for the following period is something like 27bps cut, so they say:
- 27 Is bigger than 25, so 0 cuts is 0%
- attribute 2/25bps likelihood to 50bps cut
- the remainder is left to 25bps cut
The reality is that there's a non-zero probability to unchanged, and a non-zero probability of 75bps+ cut etc etc. However this information would probably be in swaption prices and too complicated for anyone like the CME or media to make sense of. But at least with the way people talk about it they get to feel like they're making sense of the world.
You're right - I'm so used to looking at the probabilities waterfall diagram where there's always some percent for status quo I glanced right over it not being there.
In the time since I originally posted that the 400-425 basis point level has dipped another 2%, with that amount going towards a 50 basis point cut. Very muddy waters indeed.
Powell has been adamant about fighting inflation so I struggle to understand how the market gives a zero percent chance of status quo.
The tech sector labor bubble started popping last year. I don’t think we’ve hit bottom yet. Stocks are at an all time high riding the AI bubble but I think that too will pop despite the soft landing certain tech leaders will hope for.
We already had a soft landing last year right? That referred to coming out of the pandemic inflation without recession.
This year is tariffs, trade wars, uncertainty, AI, labor markets, mass firings, mass deportations. Seems like we’re into a new phase of potential stagflation.
>Will the cut really help pull the labor market up?
The capitalists don't care about the labor market as much as they do the stock market. In Trump's crazy Tilt-a-Whirl Policy and Tariff Generator (TM), what business would invest in expansion beyond what is necessary to grease the palms that need greasing? Way too much uncertainty. Time for stock buybacks.
>what business would invest in expansion beyond what is necessary to grease the palms that need greasing? Way too much uncertainty. Time for stock buybacks.
AI and AI related companies are the opposite of this.
AI is not going to be able to grow geometrically forever. OpenAI and Oracle just signed a $300 billion contract. OpenAI doesn't have $300 billion. Oracle doesn't have enough chips on hand nor enough cash to buy them in order to fulfill these obligations. Based on RPO, Oracle is estimating that their cloud revenues will grow from roughly $10 billion now to $144 billion by 2030. That's insane, and yet it was enough to send their stock price up 25%.
You're right, as far as I can tell, which will help further wreck the labor market and juice the stocks for the capitalists.
AI companies are an existential threat to those who don't control the AIs. All of the "good AI" scenarios that the AIcolytes espouse assume we have bent AI to our whims permanently.
