A top strategist at Goldman Sachs Group has a recommendation for traders who think markets have once again been too quick to bet on multiple Federal Reserve interest-rate cuts next year. Investors looking for ways to profit, or hedge against, the possibility that investors are misapprehending the likelihood of aggressive Fed rate cuts next year should consider shorting June 2024 SOFR 95.25 call options, according to a report from Praveen Korapaty, Goldman’s chief interest-rate strategist.
“With roughly 135bp of easing priced by December 2024 (and nearly 60bp of cuts to the fed-funds rate by next June), we think markets are approaching the limits of what can plausibly be priced without attaching material odds of a recession in the near term,” the team said in the note. Goldman Sachs economists only expect the Fed to cut interest-rates once in 2024, likely during the fourth quarter. But expectations among major Wall Street banks vary widely, with UBS Group pricing in multiple cuts. As of Monday, traders saw five cuts by the end of 2024 as the most likely scenario, according to the CME Group’s FedWatch tool, which tracks activity in Fed funds futures. Like SOFR futures and options, Fed funds futures are used to place bets on expectations for interest rates. Even if the Fed’s rate cuts exceed expectations from Goldman’s econo …
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“With roughly 135bp of easing priced by December 2024 (and nearly 60bp of cuts to the fed-funds rate by next June), we think markets are approaching the limits of what can plausibly be priced without attaching material odds of a recession in the near term,” the team said in the note. Goldman Sachs economists only expect the Fed to cut interest-rates once in 2024, likely during the fourth quarter. But expectations among major Wall Street banks vary widely, with UBS Group pricing in multiple cuts. As of Monday, traders saw five cuts by the end of 2024 as the most likely scenario, according to the CME Group’s FedWatch tool, which tracks activity in Fed funds futures. Like SOFR futures and options, Fed funds futures are used to place bets on expectations for interest rates. Even if the Fed’s rate cuts exceed expectations from Goldman’s econo …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]