Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

Skepticism Surrounding Fed Rate Cuts - msr1

The broader economic indicators are showing signs of improvement, albeit at a gradual pace. This trend introduces some skepticism regarding the anticipated interest rate cuts by the Federal Reserve. Specifically, the ISM Manufacturing PMI in the United States decreased to 47.8 in February 2024, down from 49.1 in the preceding month, significantly underperforming against the market predictions of 49.5. This decline signals the 16th consecutive period of downturns in the manufacturing sector, tempering any optimism for a resurgence in the industry. New orders have entered a phase of contraction, impacting production levels negatively despite a slight mitigation in the backlog of orders.

Concurrently, there has been a modest increase in prices for the second month in a row, attributed to higher costs in transportation equipment, chemicals, and computer and electronic products. This scenario, coupled with a downturn in consumer demand, has necessitated adjustments in production capacities, leading to a reduction in employment levels for the fifth consecutive month. These dynamics underscore the complexities of the current economic environment, challenging the narrative around potential policy adjustments by the Federal Reserve.

From a passive flow perspective, as long as we are not seeing a trend of meaningful layoffs, people are still contributing to 401(k)s, therefore buying stocks at any price. With no fundamental view. Supportive for markets.

Learn more about the Market Situation Report written by Tier 1 Alpha.

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