Traders Scale Back Bets On 50-Basis-Point September Rate Cut Ahead of Friday's Key Fed Inflation Gauge Data
Portfolio Pulse from Piero Cingari
Traders are scaling back expectations for a 50-basis-point rate cut by the Federal Reserve in September, following an upward revision of U.S. GDP growth. The market now anticipates a smaller 25-basis-point cut, with the PCE inflation report being a key factor. A higher PCE could strengthen the USD and impact Treasury yields, while a lower PCE could boost equities like SPY and QQQ.
August 29, 2024 | 8:46 pm
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NEGATIVE IMPACT
The iShares 20+ Year Treasury Bond ETF (TLT) might decline if the PCE inflation report is higher than expected, as this could lead to rising Treasury yields.
Higher PCE inflation could lead to increased Treasury yields, negatively impacting TLT, which is sensitive to yield changes.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The Invesco QQQ Trust, Series 1 (QQQ) could see buying flows if the PCE inflation report is lower than expected, supporting the likelihood of future rate cuts.
A lower-than-expected PCE report would support the case for future rate cuts, potentially boosting tech-heavy indices like QQQ.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The SPDR S&P 500 ETF Trust (SPY) could see buying flows if the PCE inflation report is lower than expected, supporting the likelihood of future rate cuts.
A lower-than-expected PCE report would support the case for future rate cuts, potentially boosting equities like SPY.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The Invesco DB USD Index Bullish Fund ETF (UUP) could strengthen if the PCE inflation report is higher than expected, as it would support a stronger U.S. dollar.
A higher-than-expected PCE report would likely lead to a stronger USD, benefiting UUP, which tracks the USD index.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80