Significant Shift in Fed Policy Expectations

Financial markets have sharply revised Fed policy expectations for 2024, shifting from anticipating seven rate cuts to just two (September and December) due to strong economic data.

Bond investors previously pushed for permanently easy monetary policy post-GFC, reinforcing the secular stagnation thesis, even amid rising inflation after the pandemic.

For the first time since the 2013 taper tantrum, bond investors are now more hawkish than the Fed, signaling a potential shift toward more realistic policy expectations after years of dovishness.