In today’s write up we wanted to briefly discuss the plethora of commentary coming out of the gates as it relates to Fed Fund rate cuts in 2024 and beyond.
Market expectations for Fed Funds Rate path
-Jan 31, 2024: Pause
-Mar 20, 2024: 25 bps cut to 5.00-5.25%
-May 1, 2024: 25 bps cut to 4.75-5.00%
-June 12, 2024: 25 bps cut to 4.50-4.75%
-July 31, 2024: 25 bps cut to 4.25-4.50%
-Additional cuts to 3.14% by Dec 2025
This is on the back of a goldilocks year in the markets where the indexes were up significantly across the board. Crypto is also up heavily, the animal spirits are out or so it seems.
Oil has come down in recent months, a driver in the lower CPI numbers we are seeing. Our view is that the FED will lower rates as it is an election year. The machine needs to keep the pump going.
With lower rates, housing should slightly recover both on the residential and commercial side as affordability increases. Regional banks should also have stronger balance sheets, as the 10y is now below 4%. But even with stronger balance sheets and higher interest income, they will continue tightening up credit standards. We are already seeing customers coming to us as their lines of credits are being shut down by their banks.
We are also anticipating a flurry of new finance companies pushing out large swaths of capital as there have been a ton of private credit funds that have raised billions of dollars. This money will need to go somewhere so competition will be increased.
We had an incredible run this year and have built meaningful partnerships and helped 1000s of customers in need. We are hopeful that more regulation comes to further cement the right players from the wrong ones.