In 2024, brace yourself for two surprises. First, we think that the Fed will catch markets off guard by swiftly reducing interest rates in the first quarter, possibly by 50 basis points by March.

Second, the Fed will deliver less relief than markets expect over the entire year. Consequently, we’ll likely grapple with the impact of pricing out the majority of the six anticipated rate cuts. 

Why it matters: Don’t ignore the former and focus on the latter. Sequencing matters.

The rate cuts are bullish for risk assets in the near term. We expect a continuation of recent trends—stocks higher, bond yields and dollar lower.

Flashback: Between February 1994 and February 1995, the Fed doubled its benchmark short-term interest rate from 3 percent to 6 percent to slow the economy and forestall the risk of inflation. Former Fed Vice Chairman Ala