Gaming out the Fed's next move: The investment committee weighs in
Speakers
Summary
The Investment Committee discusses the potential impacts of the upcoming Fed rate decision on the broader market and economy. Panelists debate whether the Fed is hiking into a supply shock and how the market will price in future rate cuts.
- Panelists debate the long-term impact of Fed rate hikes on bank net interest margins.
- The committee compares the current economic environment to historical hiking cycles in 1997 and 1999.
- There is speculation that the market will immediately begin pricing in rate cuts following a hike.
- Energy price spikes, particularly in diesel, are expected to keep inflation elevated due to constrained global capacity.
Ideas
Flatter yield curves will crimp bank margins.
While banks typically benefit from Fed rate hikes, a flatter yield curve will be problematic over the long term because it crimps their net interest margins, making an extended hiking cycle a headwind for financials.
