That puts the Fed Funds Rate above 5% for the first time since 2007. Remember, the higher that goes, the more expensive it becomes for consumers and businesses to borrow.
The move marked the 10th consecutive hike, but the Fed nodded to the possibility that it was the last one of this cycle — more on that here.
"It's hard for me to imagine the Fed lowering rates to the degree that is priced in without a much more serious economic downturn," Karen Karniol-Tambour, co-CIO of Bridgewater Associates said at the conference. "And either one of those scenarios is not very good for markets."
According to the CME FedWatch Tool, investors see the odds of a rate cut rising steadily starting this summer, and are pricing in almost a 50% chance that the central bank drops its benchmark rate at the September meeting.
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David Hunt, president and CEO at PGIM, echoed the Bridgewater exec's sentiment, saying that rates are "without a doubt" going to stay higher for a longer stretch than what markets have priced in.
We've already witnessed some "bodies" emerge with the failure of multiple banks in the last two months.
And with yet another Fed rate hike officially in the books, financial conditions are only going to get tighter and more companies could be caught off-guard.
Rishi Kapoor, the co-CEO of Investcorp, which manages $50 billion in assets, said at the conference that the property sector looks extra vulnerable in light of recent events.
"No doubt that the second- and third-order effect of the banking sector fallout in the US, in particular, is going to cause a constraining of financial conditions and lending," Kapoor said.
"The commercial real estate sector in particular, which was 50%-plus from the regional banking system, is definitely going to be limited."
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What's your economic outlook for the rest of 2023? Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.
In other news:
2. US stock futures trade mixed early Thursday, following the Fed's latest rate hike. Investors will be watching key reports that will inform the Fed's next moves, including data on initial jobless claims, due later today.Check out the latest market moves.
3. Earnings on deck: Apple, Shell, and more, all reporting.
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4. Meet a Baillie Gifford manager who oversees a $564 million fund. She detailed the top four investing themes she's pursuing now — including three of her favorite stock picks.
5. Goldman Sachs said retail investors have "rage sold" out of the stock market. That's the group that drove the pandemic trading boom just two years ago, but analysts estimated that they've now sold twice what they acquired during that time. Get the scoop.
7. Russian gold is flooding the UAE, Turkey, and Hong Kong. After wartime sanctions took hold, key Western buyers including JPMorgan stopped buying Russian bullion, so sellers have had to seek new markets. Get the full details here.
9. A $1.1 trillion investment chief explained her three-part checklist for confirming a recession has started. While Nuveen Asset Management's Saira Malik is expecting a downturn to hit in the next year, she still sees opportunities for buying. These are the four stocks she recommended.
10. Oil prices have declined with markets increasingly concerned about a recession. On Wednesday, West Texas crude dropped more than 4.4%, the steep declines coming the same day as the Fed's rate hike. US oil prices are now trading below $70 a barrel.
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