On April 18, strategists at major banks issued two conflicting trade recommendations, underscoring how divided the market remains over the prospects for a rate cut by the Federal Reserve.
Short-term interest rate futures are pricing in a cumulative rate cut of about 150 basis points from September 2023 to September 2024.
Goldman Sachs thinks the forecast is overdone, while TD thinks it’s not enough. Goldman Sachs strategists on Friday recommended a bet on a narrower spread between September 2023 and September 2024, while TD made the opposite bet.
TD Bank expects the Fed to cut rates by a total of 275 basis points between December 2023 and September 2024.
Goldman Sachs strategists such as Praveen Korapaty wrote in the report that investors have overestimated the rate cut forecast and waited for stronger economic activity data and peer data to be released, and they will rethink the rate cut bet.