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Higher Employing Creating Risks ?

As we finish with the first 45 days of this year and compare it to the last 45 days of the previous year there have been a lot of changes in investors views relating 2024 trajectory. Goldman Sachs over the weekend upgraded its S&P 500 to 5200 for the year. The interest rate cut-offs have moved back to June 2024.

All these are reactions to Fed policy that still has to give any clarity on when the rate cuts begin. There is also a continuous emphasis on being data-driven. And as far as data is concerned the recent releases are not in line with estimates. Citibank's estimated surprise index is at 40, meaning there are more surprises above estimates.

In all of these data releases the most important are inflation and employment. Inflation continues to gain momentum on the upside as services and food costs rise. Employment is the major surprise as the Federal Reserve and other stakeholders expected that due to the rise in interest, there will be higher unemployment.

This has not been the case despite higher job cuts announcements since last year the payroll and unemployment data remains strong. There has been a decrease in temporary workers but back to work percentage is stable.

If these strengths remain in months to come then it would be impossible for the Fed to justify a cut unless the inflation and economy take a hit due to some hidden risks. Till then wagers for a rate cut might get adjusted further.


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