Federal Reserve (Fed) policymakers are set to meet again this week with another quarter-point rate hike widely expected.1 Despite better news on the inflation front recently and a weaker-than-expected June employment report, policymakers are likely to follow through on recent communication suggesting one more hike is necessary to keep inflation trending toward its 2% target. Futures markets are pricing in more than a 95% probability for another hike on Wednesday. Short-term interest rates are now expected to hold steady for the balance of the year. Similar to most recession forecasts, the potential for interest rate cuts by the Fed has now been pushed out into 2024.
This week’s economic calendar is highlighted by our first read on second quarter gross domestic product (GDP) on Thursday and the Fed’s favorite inflation gauge — personal consumption expenditures (PCE) — out Friday.2 Equity valuations suggest the return of the pre-COVID Goldilocks economic environment with inflation and growth running near 2%.
Some large-cap tech equity market leaders this year such as Meta, Alphabet and Microsoft are set to report earnings this week.3 These earnings announcements take on added significance after Taiwan Semiconductor suggested last week that the benefits of artificial intelligence (AI) aren’t nearly enough to offset weakness in other parts of its business.
1Yahoo! Finance – Fed Readies Another Rate Hike in Pivotal Week for Central Banks; 7/22/2023
2MarketWatch – U.S. Economic Calendar; as of 7/24/2023
3Reuters – US STOCKS-Futures edge up ahead of more Big Tech earnings, Fed decision; 7/24/2023
This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.