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The Fed and Nvidia are Higher for Longer

May 24, 2024

This past week interest rates inched up as "higher for longer" signs around the globe emerged. Before we get into the news, let's take a moment to reflect on this Memorial Day holiday and its significance.

Originally called Decoration Day, Memorial Day was first observed after the Civil War and is in remembrance of those men and women who have died in military service for our country. Memorial Day was declared a Federal Holiday in 1971 and commemorated on the last Monday in May. Memorial Day weekend is often the unofficial kick-off of summer.

The Fed is Higher for Longer

On Wednesday, the Minutes from the previous Fed Meeting three weeks ago highlighted that most Fed officials do not see the need to cut rates anytime soon.

You may recall at that Fed Meeting, Fed Chair Powell was clear they were not going to hike rates and they were not going to cut either. After sharing the Minutes with the world, we now know the Fed is waiting for inflation to move "sustainably towards 2%" before cutting rates unless the labor market shows weakness.

As of this moment, the chance of a Fed hike has been pushed to November.

The UK is Higher for Longer

Earlier last week, the United Kingdom reported inflation higher than expectations, and this immediately pushed the chance of a rate cut in the region from June until further into the year. As a result, interest rates around the globe spiked higher, including here in the U.S.

Nvidia is Also Higher for Longer

On Wednesday after the bell, chip maker Nvidia reported blockbuster earnings, well beyond expectations. Also helping stocks move higher for longer was Nvidia‘s sales outlook for the future, which highlights that AI or artificial intelligence is moving very fast, and Nvidia is at its forefront.

Dimon Says Brace for "Hard Landing"

JP Morgan Chase CEO, Jamie Dimon was speaking in Shanghai where he said there is a chance the U.S. could endure a "Hard Economic Landing" which could also include stagflationary conditions – slower growth and higher prices.

Bottom line: Higher for longer it is, until it isn't. What will change the Fed's position is a change in the labor market or signs inflation is moderating.

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