Economic Collapse & When The Fed Will Drop Rates

The economy is slowing and pundits are clamoring for a rate cut from the Fed. Here is a look at the data the Fed is keeping an eye on.

SPY Stock 1-Hour Chart

The stock market is selling off today. Over the past week, several data points have shown up - along with a Federal Reserve meeting. Whereas most market pundits entered 2024 with an expectation of 6 rate cuts, I have consistently maintained that was unrealistic. Instead, I have pushed that the Fed would slowly begin to lower rates at first - and, toward the end of the year. But, despite the relief of lower interest rates, when the Fed did finally move, it would be to protect an economy that is being weighed heavily from higher interest rates for longer. The latest data points show a continued subtle shift in economic data toward a downside contraction. And, consistent with my thinking, the economy will contract modestly at first - then much faster later.

As you can see above, the stock market is not happy about the most recent economic indicators - Initial Jobless Claims & Continuing Jobless Claims. Both of these indicators are showing that the economy is contracting. But, the economy is contracting from a very rapid growth pace. For now, the move in the stock market may be a bit skittish considering where the economy currently is.

But, this is just the start of a much bigger move I have been anticipating. While there is evidence that the Fed can lower interest rates, I believe they will do so cautiously at first, then far more rapidly later. The stock market may not like this at all.