Rates: Hot off the press!

To cut rates or not to cut rates in March? Speculation is still rife between the rhetoric of some and the expectations of others. Last week, the Fed brought its hawks out of the woodwork, as did the ECB at the World Economic Forum in Davos, to calm the ardor of the staunch supporters of a rapid rate cut. While fixed-income investors seem to have had enough, the equity market prefers to focus on the good news about the Fed. Before reality catches up?

In the absence of any major economic statistics, investors have focused mainly on corporate earnings, and for once, they prefer to see the glass as half full rather than half empty. Despite a certain call to order from the main central bankers on the future trajectory of key interest rates, the stock market, especially in the US, is doing well, with the S&P 500 recording new all-time highs.

However, the message from rates is not to be taken lightly. Last week, we told you that a breach of the 4.07% mark on the US 10-year would mark the end of the downward trend that began last October. This easing had been accompanied by a surge in the equity market. Deprived of this support, the latter will have to find other support (besides AI?) if it wants to continue its bullish rally. In the meantime, the next resistances to watch on rates are respectively 4.23/25% before 4.40/43%, the maximum being the 4.60% we highlighted in our central scenario for 2024.

Source: Bloomberg