Here’s our Club Mailbag email [email protected] — so you send your questions directly to Jim Cramer and his team of analysts. We can’t offer personal investing advice. We will only consider more general questions about the investment process or stocks in the portfolio or related industries. This week’s question: CNBC guests often say six Fed cuts are priced into the 2024 market. How do they know? Is it just their opinion? Do they have some calculation or is this just a pitch to support some bearish investment strategy? – Mike H. When you hear about the number of Federal Reserve interest rate cuts being priced into the market, the data comes from the CME FedWatch tool . This tool, which leverages data from fed funds futures contract prices, can be used to determine the likelihood of a cut (or hike) in the near-term, like the next meeting, or where rates might be headed over the next year. The overnight fed funds bank lending rate is the rate that everyone is referring to when talking about Fed rate moves. The current range is 5.25% to 5.5% following 11 rate hikes from March 2022 to July 2023. There was a pause at the June, November and December meetings. In terms of cuts being “priced in” for the full year, this is determined by where the market predicts the Fed target rate will be by year-end in December. Looking at a snapshot at the CME FedWatch tool, as of this writing and ahead of Wednesday afternoon’s Fed rate decision and central bank chief Jerome Powell news conference, it shows the probability of various targets by December 2024. As we can see, the highest probability, roughly 40%, is being attributed to the 375 to 400 basis point cut range by year end. Each cut amounts to a 25-basis point, or 0.25 percentage point, reduction to the range. One hundred basis points equals 1 percentage point. So, with if the current fed funds range is 5.25% to 5.5%, as we can see right above the chart, then the implication is that the Fed will cut by 150…
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