MBCC TH 6th January'23 - Where do we see terminal growth rates going? That is the key debate in the market! What does this mean for Equities and Commodities?

This is the key debate in the market right now, i.e. where will the terminal growth rate settle? 5%? 6%? Or 4%? This is what is causing the markets to move up and down as the data comes in hawkish. Fed officials have pledged to keep raising rates and keep them high until inflation recedes to near the Fed’s 2 percent target, as measured by the core Personal Consumption Expenditures (PCE) price index. Core PCE, which excludes the volatile categories of food and energy, in November came in at 4.7 percent, more than twice the Fed’s target. In their most recent summary of economic projections, the Fed officials said they expect the terminal Fed Funds rate—meaning the highest level before it hits a ceiling and later falls—to come in at 5.1 percent.

Now we know the Fed has been clueless and horrid at forecasting rates, i.e. in 2021 they said they do not see themselves raising rates in 2022! Look what they had to do, and how fast! Today they say we do not see the Fed cutting rates in 2023! Do we believe them? Not really. But it does not mean they will go from raising to a cut without any proper damage being felt.

We go through all the sell side notes for 2023 and tell you where THEY ARE/WILL BE WRONG for 2023 as we cross check them with our cross asset model indicators.

We know the street always move AFTER the fact, not really providing any value to any investors. Trading is all about what is priced in and the risk/reward ratio!

We are NOT buy and holders, we buy if there is 20% upside or sell if there is 20% downside. Do you want to be tactical or just buy and keep ho[ping the market “eventually” goes up.

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