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- 1 Goldman Sachs has updated the timeframe for Fed rate cuts and decreased the expected rate cuts from five to four.
- 2 The S&P 500 has experienced a positive movement in the first two months of 2024, with a significant movement from a few major components of the index.
- 3 The crypto space is expected to grow in 2024 amid fund withdrawals by Bitcoin whales.
The economists at Goldman Sachs have shifted their timeline for Federal Reserve interest rate cuts. It brings back the expected start date from May to June. It follows recent pronouncements from central bank officials and the release of January meeting details.
Updates on the Interest Rate Cuts by Goldman Sachs
Goldman Sachs, the renowned investment bank, predicts four rate cuts throughout 2024, decreasing from the previous expectation of five rate cuts. Goldman Sachs layoffs have been in news in 2024, but now the bank seems focused on the future. The details of the rate cuts were also mentioned in Bloomberg’s first report, authored by famous economists, including Jan Hatzius.
The current interest rate cuts will be revealed in the following months: June, July, September, and December. Initially, it also expected a rate cut in May. Each rate cut will witness a rate cut of 25 bps. However, the target terminal rate, which is between 3.25% and 3.5%, remains unchanged.
Analysts from Goldman Sachs have stated, “Because there are only two rounds of inflation data and a little over two months until the May (Fed) meeting, his comments suggest to us that a rate cut as early as May, which we had previously expected, is unlikely.”
Policymakers have suggested that they are not rushing to reduce interest rates. On Thursday, February 22, Christopher Waller, the Governor of the Federal Reserve, shared the need for a few more months of inflation data to verify and track the price stability of the economy.
In the third week of February, three Fed officials replicated the central bank’s commitment to lowering rates in 2024, not in the first half of the year. In addition, in the middle of January, a few investors and economists anticipated that the FED would begin rate easing at the upcoming meeting scheduled for March.
Goldman Sachs Upgrades S&P 500 Target Upwards
Goldman Sachs has revised the S&P 500 target upwards twice since the beginning of 2024. It results from increased confidence on Wall Street in the earnings potential of the investment bank. The increase in profit estimates is backing the optimism around the company.
Goldman Sachs’ analysts noted robust economic data that suggests the officials have been less worried about the adverse effects of prolonged high-interest rates. It further indicates that the most significant risk associated with high-interest rates is behind us, recommending interest rate cuts as less urgent.
Highlights from the Recent Movements of the S&P 500
Over and above the previously mentioned details, the analysts suggest Federal Reserve officials seek more standard and dependable evidence that the inflation is on track to reach the 2% target before implementing cuts. A concern is that a stronger economy could hinder further progress on inflation reduction.
This information has probably become part of the pricing in this analysis. The S&P 500 moved up 4.7% in January and 1.6% on February 22 with the strong earnings release by NVIDIA.
At the same time, Bitcoin has moved up over 28% in the past month but decreased 1.8% over the past week as investors moved to equities with the growth of the S&P 500. Gold has also been traded sideways in the past month.
Conclusion: Growth Potential of the Crypto World Amid Bitcoin Withdrawal
A partner with cryptocurrency hedge fund Pantera Capital stated that a cryptocurrency space is notably on the verge of unlocking a massive $500 billion opportunity in the rapidly expanding decentralized finance (DeFi) sector.
Bitcoin holdings on Coinbase, a Nasdaq-listed cryptocurrency exchange, have fallen to their lowest level since 2017 as BTC Whales have withdrawn funds into self-custody.
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
