When the yield on the U.S. treasuries fell last Friday, March 31, 2023, it reacted to the lighter core PCE figures. Yields for T-bills ranging from 3 months to 30 years are lower for the month. The market is expecting the Federal Reserve to cut interest rates soon.
The Fed has a Funds rate that is below that of inflation. As inflation rates slow, the favorable comparison to last year’s 9.1% CPI peak will help stock markets. Speculators are already pricing lower interest rates, even though the Fed said it will not cut rates until 2024.
The YTD return of the S&P 500 ETF (SPY) is 7.05%. Nasdaq (QQQ) is in bull market territory for 2023. The ETF is up by 20.52%. Tech investors piled onto the companies most resilient to any downturn. Microsoft (MSFT) has a chance to take Alphabet’s (GOOGL) search engine dominance with ChatGPT. In the streaming sector, Netflix (NFLX) is higher as investors bet that consumers will pay for the price hikes and surcharge for password sharing.
Netflix is also testing the prospects of offering games on its platform. With FANGMG stocks alive and well, those stocks rose the most in the first quarter. Chances continue that they will rise further when the Fed cuts interest rates.
