Will The Market Boom or Bust in 2024? Ask the Fed.

We know the who.

We also know the what, the where, and the why.

Only thing we don’t know is the when.

My bet: March 20. Early afternoon.

And what are you prattling on about, El Jefe?

That answer: Jerome Powell, the Federal Reserve’s first interest rate cut, from the Eccles Building in D.C., because the Fed has realized “higher for longer” was never really the goal. It was just lip service to keep the financial markets in check.

Alas, as I regularly contend, the financial markets very often wag the Fed.

And they did this time as well.

The markets have known for a while that the Fed really has no choice but to give up the ghost on its “higher for longer” messaging campaign. Too much pain on Main Street and Capitol Hill.

Consumers are getting crushed by high interest rates on their exorbitant credit-card debt. Median home prices are falling because mortgage rates are so off-putting that would-be home sellers aren’t selling because they don’t want to trade their current low-rate mortgages for high-rate mortgages that imply they’d be able to afford less house than they already have… or pay a higher monthly note.

And up on Capitol Hill, Uncle Sam’s feeling it too.

The White House projects that Sammy’s net interest expense for fiscal 2024 will close in on $800 billion. A dismal, historic high. Of course, that’s just wing-and-a-prayer math from the White House bean counters. They projected 2023’s interest payments would amount to less than $500 billion, yet they ended up topping $700 billion.

So $800 billion is probably closer to a trillion.

But back to the “when.”

Powell and the Island of Misfit Moneymen will hold their second meeting of the year on March 19 and 20. And it’s always on the second day, 2 p.m. ET, when Señor Powell strides up to a mic in the Eccles Building to announce what the Oracles of the Economy have decided. It’s a bit like Punxsutawney Phil and Groundhog Day—will we have more pain, or is the sun soon to shine?

The sun will indeed shine on March 20.

That seems most likely for a key reason: The presidential election.

The Fed shies way from playing politics—or being accused of playing politics—in an election year.

Back in December, Powell told the world that the Fed has deep-sixed the “higher for longer” mantra and relaced it with “cutting sooner than expected.” Powell said the Fed govs see three rate cuts likely in 2024 and more cuts for 2025 and 2026.

I am not so sure 2025 and 2026 will see rate cuts. Could very well be that the next inflation waves hamper those plans, but we will address them later in the year.

All I really care about at the moment are the cuts for 2024, since they will be tailwinds for stocks, bonds, and crypto, and they will push mortgage rates lower, which will bring a smile to the housing market.

But let’s think about timing…

The election is in November. Between now and then, the Fed will meet five times: March, a combined April/May meeting, June, July, and September.

September is getting way too close to election time. My bet is that the Fed will be very quiet at that meeting. I’d wager that the minutes from that meeting will read something like: “Chairman Powell nursed a 7-Up and predicted that the Yankees would probably take the World Series in October. Gov. Adrian Kugler vehemently protested, asserting confidently the 76ers would win it all. Gov. Lisa Cook reminded Gov. Kugler that the Yankees are a baseball team, and the 76ers play basketball.”

So, with the election bearing down on us, the Fed really has just four meetings at which it’s likely to cut rates.

First one in March.

Second one in April/May.

Skip June on the notion that the Fed wants to see how the economy is reacting to the cuts.

Then, third cut in July.

And radio silence until after the election.

By my estimation, that means 2024 should be a pretty good year for financial markets. They love falling interest rates.

But we shall see.

Tune in again on March 20, at 2 p.m. ET, as we play the next round of “Who, What, When, Where, and Why” to determine if Jeff was right.