The US economy is less sensitive to rate cuts than we thought: Brenda O’Connor Juanas

Welcome back this time now for the word on Wall Street. Top investors watching your money. Join me right now is UBS Wealth Management senior vice president Brenda O'Connor Quanas. Also with us is John Lotsky. Brenda, good to see you. Thanks for joining the conversation this morning. I want to kick things off with you, John, with oil. Take a look at the price of oil this morning. Pulling back, OPEC Plus is announcing plans to phase out voluntary production cuts totaling 2.2 million barrels a day beginning in October. And yet, oil is down almost 2% this morning at 7288, still elevated in the $72 range. But what's your expectation and reaction here? Well, you know, my first impression is this latest decline by the price of crude oil is in response to a lower than expected demand for crude oil, putting downward pressure on the price as we are at the start of the peak driving season in the United States and elsewhere in the Western world. This is, I think, quite noteworthy. And not only is the price of oil down this morning, so is the price of copper and some industrial metals. So perhaps we're getting some hint of the beginning of a period of slower economic growth. Is that what you see, Brenda, as well? I mean, when you look at interest rates in the 10 year Treasury yield this morning, we've broken through 4.4% on the 10 year. Take a look at yields this morning. With the 10 year now sitting at 4.38%. The futures market is pricing at a 59% chance the Fed will cut interest rates in September and a 72% chance they'll cut in November. We've got a big week of jobs data on deck. The April Jolt report out this morning at 10:00 AM Eastern. Economists are expecting 8.35 million job openings available at the end of April. Then we'll get the ADP number tomorrow morning. And we've got the May jobs report out, of course, on Friday. Brenda, look, if we're looking at an economy that is slowing and we've still got all this job creation, does it really make sense for the Fed to cut rates? What are you expecting? So Maria, let me just say this. The biggest surprise in the markets this year is that the US economy is as not, not as sensitive to rates as we thought. You know, we at the beginning of the year, we expected six rate cuts. We haven't seen any of those and look best in peace up 11%. Our expectation for rates is 2 rate cuts starting in September. Frankly, I think we should be lucky if we get one. And as importantly, drawing that back into the job story, the path, the quickest path to rate cuts is not going to be through inflation. We saw the disinflation and the stickiness in last week's PCE report. It's going to be through job weakness. So Jolts will be important today, as will payrolls this Friday. Maria. Yeah, I know. But Brenda, do you think we're going to see rate cuts this year or no? The official UBS forecast is for two rate cuts, 50 basis points this year. I think we get one. We think the 10 year will come closer to 4%. It's again trading in that range between four and a quarter, 4 1/2. You know, the the data is not there, Maria, at this point, it's just not there. It's not there. And of course, then it's also an election year, John. So how does that shift things? What how does that play into your thinking? Well, I'd like to think that the Federal Reserve is independent of political forces, but there you never know. I would say though, you know, Brenda is right on the importance of the labor market to where interest rates and where the economy said it very important. But I take exception to that one statement where higher interest rates haven't have not mattered much. I think higher interest rates right now are doing damage to the economy. You know, I'm looking at mortgage applications from potential home buyers in the current quarter. They are at their lowest level for any second quarter for any peak selling season for housing since the Great Recession. And we had this report that came out last week on the index of pending home sales that was down by 8% from the prior month in April. Usually April is a great month for the housing industry. So I, I think we're, we're at the start of beginning to observe a number of incidents where higher interest rates are beginning to take their toll of U.S. economic activity. I know of people in Westchester County that are trying to sell homes in the 2,000,000 to $3,000,000 range and can't move them. They can't get people to even view the homes. Well, it is true, Brenda, that many people say that we haven't really seen the impact of 11 rate hikes yet and that we'll continue to see that because it took more time than many expected because of all of the federal stimulus money still flowing. Yeah. And, you know, to that point, Maria, I think there is a disconnect between what the data has said to this point and what the US consumer is feeling. And I think that's shifting, right. You saw again in last week's PC report a very important number around personal income. This is important because it actually measures what Americans are putting into their pockets after taxes and inflation. This number is negative. We know consumers frankly don't care necessarily what's happening in the S&P. They care about what they're feeling and seeing to John's point. So I do think that we are seeing a reversal in terms of how the consumer is feeling and the how these eleven rate cuts are eventually and finally working its way through the system. Yeah, all really great points. Markets down 150 right now. Are you expecting a good second-half, Brenda, for stocks? So our view on the S&P is that we go a little bit higher from here. 5500 is our new target. Look, that's three to 4% higher from here. I think it's bumpy along the way. There's a little more scope for upside, but it's not going to be necessarily that great going into 2025. All right, we'll leave it there. Great to see you, Brenda. Thank you, Brenda. O'Connor Juan is joining us. John, you're with us all morning. We appreciate that.

OTHER NEWS

16 minutes ago

Prince George's godmother reveals her birthday tradition with the young royal inspired by Princess Diana - but admits it's hassle for William

16 minutes ago

‘20 Days In Mariupol’ Secures Double Grierson Nomination

16 minutes ago

Ryanair shares tumble 12% as budget airline reports 46% fall in quarterly profit, sees lower fares

16 minutes ago

Civilians in Sudan endure 15 months of 'indiscriminate and widespread' violence: Humanitarian report

16 minutes ago

ITV Sports presenter Laura Woods expecting baby with Love Island star

16 minutes ago

Scott Robertson: All Blacks San Diego Test shows how ‘healthy’ rugby is in the USA

16 minutes ago

Liverpool target Brazilian defender as Van Dijk exit accelerates and Slot pleas fall on deaf ears

16 minutes ago

Actor Rob Delaney says 'there's so much money' in UK as he calls for 'Robin Hood-style' taxes

16 minutes ago

Opening of Parliament | Ramaphosa to respond to debate

16 minutes ago

Melanie Sykes hits out at BBC in sweary rant

16 minutes ago

Bangladesh court scraps most job quotas that sparked deadly protests

16 minutes ago

Video: Aussie men in their 30s reveal exactly how much they have in savings (and it's less than you'd expect)

16 minutes ago

Video: Mum-of-three, 24, accused of running down and killing young mother in her SUV outside a Daisy Hill, Brisbane daycare centre in alleged hit-and-run murder

16 minutes ago

McLaren boss never doubted Norris as a team player

16 minutes ago

Allen’s lollies brings back an Aussie favourite with six new killer flavours

16 minutes ago

How To Replace the Battery Terminals in Your Car

16 minutes ago

Five things from the Dana Open, where Chanettee Wannasaen prevailed and the Sohleim Cup captain was low American

16 minutes ago

Rafael Nadal 'not comfortable' but glad to avoid injury ahead of Paris Olympics

16 minutes ago

NASCAR Cup Indianapolis: Kyle Larson wins drama-filled Brickyard 400

16 minutes ago

Struggling Australians turn to Buy Now Pay Later services to pay for essentials

16 minutes ago

Thousands protest against mass tourism in Mallorca

16 minutes ago

Jack Grealish is 'STILL on edge after £1m raid on his £5.6m home eight months ago' - as Man City star 'worries thieves will never be caught' with Police still yet to make an arrest

16 minutes ago

How Aussie cricket star who hasn't played footy for SIX YEARS won an AFL contract

16 minutes ago

The surprising time the first Aussies will be in action at the Olympic Games

19 minutes ago

Trump faces a tighter race with Kamala Harris set to replace Biden, experts say

19 minutes ago

A PhD student at a top Chinese university publicly accuses her supervisor of sexual harassment

19 minutes ago

Pakistan protests to Germany after protesters get into the grounds of its Frankfurt consulate

19 minutes ago

‘Kamala IS brat’: Charli XCX endorses Harris and the VP is thrilled

19 minutes ago

Cricket-New India coach Gambhir backs Kohli, Rohit to play 2027 World Cup

19 minutes ago

Hamilton takes 200th podium after ‘hair-raising’ duel in Hungary with Verstappen

19 minutes ago

Who Is Ryan ten Doeschate? Netherlands Legend Who Has Joined Gautam Gambhir As India's Coach

19 minutes ago

Olympic legend Stephanie Rice eager to raise standards in UAE swimming

19 minutes ago

Diversity officer victimised and forced from University of the Arts job wins tribunal

19 minutes ago

Gautam Gambhir sets the record straight on his relation with Virat Kohli: 'We exchanged texts after my appointment but…'

19 minutes ago

The Guardian view on defecting from North Korea: escape is harder than ever

19 minutes ago

Sinwar warned Israel of escalation weeks before October 7 attack, N12 report

40 minutes ago

Aussie men in their 30s reveal exactly how much they have in savings (and it's less than you'd expect)

40 minutes ago

Wolves target Adams set for Torino

40 minutes ago

‘My pension is barely growing – should I withdraw it all to put in a savings account?’

40 minutes ago

Thousands in Mallorca demand 'less tourism, more life' in pushback against overtourism