• Market participants are beginning to recognize that interest rates may stay higher for longer (see chart), with expectations over the last few weeks moving from several cuts to 2-3 cuts by the end of 2024.
• Interestingly, expectations for more restrictive financial conditions have not done much to slow down risk assets.
• The S&P 500 is up more than 7% in 2024 through the end of February while Bitcoin, which if nothing else has been a decent proxy for risk appetite in markets, is up more than 40%.
• This is a small sample size, but it’s worth contrasting against the narrative that Fed policy has a significant impact on markets in the short/intermediate term.

Sources: 

1. Investor’s Business Daily; https://www.investors.com/news/economy/fed-rate-cuts-federal-reserve-sp-500/
2. Morningstar Direct