Happy Friday eve, readers. Phil Rosen here. Surprising no one, the Fed raised interest rates by 25 basis points yesterday.
That puts the Fed Funds Rate above 5% for the first time since 2007. Remember, the higher that goes, the more expensive it becomes for consumers and businesses to borrow.
The move marked the 10th consecutive hike, but the Fed nodded to the possibility that it was the last one of this cycle — more on that here.
As for today, we're bringing you on the ground reporting from one of the top investing conferences in the world.
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1. Elite money managers overseeing trillions of dollars convened at the 2023 Milken Global Conference in Los Angeles this week.
With the Fed's decision looming, their rate forecasts looked further into the future, and Insider's Akin Oyedele had a front-row seat. The consensus was clear: they think markets are mispositioned for a scenario where the central bank keeps rates higher for longer.
"It's hard for me to imagine the Fed lowering rates to the degree that is priced in without a much more serious economic downturn," Karen Karniol-Tambour, co-CIO of Bridgewater Associates said at the conference. "And either one of those scenarios is not very good for markets."
According to the CME FedWatch Tool, investors see the odds of a rate cut rising steadily starting this summer, and are pricing in almost a 50% chance that the central bank drops its benchmark rate at the September meeting.
David Hunt, president and CEO at PGIM, echoed the Bridgewater exec's sentiment, saying that rates are "without a doubt" going to stay higher for a longer stretch than what markets have priced in.
"As our chief economist likes to say," Hunt said, "at higher rates, bodies will continue to float to the top over the course of the summer."
We've already witnessed some "bodies" emerge with the failure of multiple banks in the last two months.
And with yet another Fed rate hike officially in the books, financial conditions are only going to get tighter and more companies could be caught off-guard.
Hunt anticipates the clamp-down on the banking system to limit available credit and firms' capital bases.
Here's how he put it:
"We are going to see now a real slowing that begins to happen to aggregate demand because of the decrease in the supply of credit that's coming in."
Rishi Kapoor, the co-CEO of Investcorp, which manages $50 billion in assets, said at the conference that the property sector looks extra vulnerable in light of recent events.
"No doubt that the second- and third-order effect of the banking sector fallout in the US, in particular, is going to cause a constraining of financial conditions and lending," Kapoor said.
"The commercial real estate sector in particular, which was 50%-plus from the regional banking system, is definitely going to be limited."
What's your economic outlook for the rest of 2023? Tweet me (@philrosenn) or email me (prosen@insider.com) to let me know.
In other news:
2. US stock futures trade mixed early Thursday, following the Fed's latest rate hike. Investors will be watching key reports that will inform the Fed's next moves, including data on initial jobless claims, due later today. Check out the latest market moves.
3. Earnings on deck: Apple, Shell, and more, all reporting.
4. Meet a Baillie Gifford manager who oversees a $564 million fund. She detailed the top four investing themes she's pursuing now — including three of her favorite stock picks.
5. Goldman Sachs said retail investors have "rage sold" out of the stock market. That's the group that drove the pandemic trading boom just two years ago, but analysts estimated that they've now sold twice what they acquired during that time. Get the scoop.
6. The housing market is starting to show signs of a rebound. If you look at cancellations for homes under construction, the quarterly decline is dramatic. Currently, that indicator is nearly in line with what was seen at the height of the housing boom in March 2022.
7. Russian gold is flooding the UAE, Turkey, and Hong Kong. After wartime sanctions took hold, key Western buyers including JPMorgan stopped buying Russian bullion, so sellers have had to seek new markets. Get the full details here.
8. Real-estate wealth manager David Wieland shared a low-risk strategy that his mom-and-pop clients have used for decades to scale their portfolios. Plus, he broke down what it takes to become a millionaire "hiding in plain sight."
9. A $1.1 trillion investment chief explained her three-part checklist for confirming a recession has started. While Nuveen Asset Management's Saira Malik is expecting a downturn to hit in the next year, she still sees opportunities for buying. These are the four stocks she recommended.
10. Oil prices have declined with markets increasingly concerned about a recession. On Wednesday, West Texas crude dropped more than 4.4%, the steep declines coming the same day as the Fed's rate hike. US oil prices are now trading below $70 a barrel.
Curated by Phil Rosen in New York. Feedback or tips? Tweet @philrosenn or email prosen@insider.com.
Edited by Max Adams (@maxradams) in New York and Hallam Bullock (@hallam_bullock) in London.