Year-End Insights

Below are macro insights of where we find ourselves today.

• Second-quarter gross domestic product (GDP) grew at a 3.8% annualized rate, according to the third estimate.
• The most recent core personal consumption expenditures (PCE) index report (for August, released September 26) came in at 2.9%, in line with expectations.
• One-year breakeven inflation rates are 2.74%, two-year breakeven rates are 2.65% and five-year breakeven rates are 2.47%. Long-term inflation expectations remain steady in this range.
• Where two-year Treasury note yields go, the US Federal Reserve (Fed) follows, historically. As of this writing, the two-year note yields 3.65% (with the effective federal funds rate in the range of 4.0%‒4.25%), suggesting two-ish additional interest-rate cuts are likely at upcoming Fed meetings.
• Federal fund futures show an 88% chance of a 25-basis-point (bp) interest-rate cut in October and a 69% chance of a 25-bp cut in December.
• The US dollar index (DXY) is about 98 in recent trading. Despite fears of sustained dollar weakness, the dollar has been in a range for the last 5 months.

In sum, the economy appears to remain resilient, and the Fed is cutting rates in the middle of an economic expansion. Historically, such conditions have been bullish for risk assets.

Read more here.