00:00 Speaker A
So, obviously, we're now looking ahead to the Fed. I know you're pouring through all of the notes trying to see what people are expecting and how that could then affect their outlooks.
00:11 Ines
Yeah, absolutely. And what we've seen is that markets largely are baking in this probability of that rate cut. And right now investors are also baking in the probability that we'll see three more rate cuts. That's according to the FM, uh that's right there, the CME uh Fed Watch tool. As you could see there, that quarter point cut is expected among the street. They're also baking in three cuts by the end of the year. And one note as well coming from Brian Rose, he's a senior US economist at UBS and he even said that their base case remains unchanged calling for a 25 basis point cut at each of the next four meetings for a total of 100 basis points by January. And so really this this market is taking into consideration that we are going to see this relief, uh rates coming down over the next few meetings, something that we haven't seen in quite some time.
00:59 Speaker A
Um, Ines, you've been of course looking through a lot of the research as well and you have to wonder with all of this enthusiasm seemingly in stocks here, what the potential risks risks are going forward? I believe it's Goldman Sachs that's highlighting potential ones.
01:15 Speaker C
Right, Goldman Sachs highlighting two potential risks. They're basically saying that the market is sort of pricing in resilient US growth, a dovish Fed. That's why you're seeing stocks at all-time highs and bond yields trending lower. But they're saying there are two risks. One is if the labor market turns into a recessionary dynamic, so to speak. Uh that then you could see the markets quickly repricing because the Fed would be pulling forward perhaps some cuts, uh but that would be putting pressure on equities. So for the next few months, Goldman Sachs is saying it's going to be a period of maximum risk when it comes to the labor market. Then also the second risk being that if growth actually holds up, the markets may be fearing that they perhaps have overpriced fed rate cuts. So in that case, you could see yields rising, uh and that wouldn't be as supportive for equities. But Goldman's base case is that you are going to see growth gradually reaccelerating into 2026 and the Fed is going to be cutting into a non-recessionary environment.
