Scorching US economy throws off market's Fed cut narrative

February 05, 2024

That narrative has been jolted by evidence that the economy may be running too hot for the Fed to cut rates without risking an inflationary rebound. Plenty of investors believe the strong growth is a positive for stocks, especially if accompanied by better-than-expected corporate earnings. "I'll trade a stronger economy with less rate cuts than a weaker economy with more rate cuts," said Keith Lerner, co-chief investment officer at Truist Advisory Services. "January job growth figures were strong, possibly too strong," said Russell Price, chief economist at Ameriprise, in a Friday note. Investors are still pricing in around 125 basis points of Fed cuts this year, LSEG data shows.