Good morning. Markets get more in line with the Fed, economists dial up the criticism and putting a number on a rough year for private equit [View in browser](
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Good morning. Markets get more in line with the Fed, economists dial up the criticism and putting a number on a rough year for private equity. Hereâs whatâs moving markets. â [David Goodman]( Traders cave to Fed âBond traders are finally heeding one of the marketâs oldest lessons: Donât fight the Fed.â Thatâs the stark takeaway from a great piece from Michael Mackenzie, Liz Capo McCormick and Ye Xie today that shows how investors are (eventually) getting on board with the Federal Reserveâs cautious rhetoric on rate cuts and dialing down their exuberance on the amount of easing this year. Theyâve started pricing in that the Fed will carry out just four â or five at the most â quarter-point rate cuts in 2024, only slightly more than the three penciled in by policymakers and a sharp shift from the end of last year, when futures traders were wagering on seven such moves. Economist criticism As markets (albeit reluctantly) get more in line with the Fedâs thinking, economists are [increasingly critical of the current stance.]( In a survey by the National Association for Business Economics poll published Monday, 21% of respondents considered the US central bankâs current monetary policy stance to be âtoo restrictiveâ â the most since 2011. That survey was carried out before the Fedâs latest meeting, when it signaled that the next gathering in March would be an unlikely starting point for rate cuts. Flurry of fedspeak Fed policy makers will get the chance to address both sets of market players this week, with a total of eight officials making appearances. Michelle Bowman, Tom Barkin and Neel Kashkari kick things off on Monday on an otherwise quiet day for data, although that changes tomorrow with the release of monthly CPI data. Steady markets On a trading day disrupted by Lunar New Year holidays in much of Asia, US equity futures were little changed after the S&P 500 closed above 5,000 for the first time on Friday. That move was driven by a renewed rally in big tech companies, and some of that [positive momentum]( carried over into Europe Monday, with stocks edging higher. Treasuries and the dollar were steady after wrapping up a sixth week of gains, the longest winning streak since early September. Private equity pain Private equity funds last year [returned the lowest amount of cash to their investors since the financial crisis 15 years ago](, according to a new report, hampering buyout firms in their efforts to launch new investment vehicles. Distributions to so-called limited partners totaled 11.2% of fundsâ net asset value, the lowest since 2009 and well below the 25% median figure across the last 25 years, according to Raymond James Financial. âThe cash flow math at the investor level is broken,â said Sunaina Sinha Haldea, global head of private capital advisory at the firm. What Weâve Been Reading This is whatâs caught our eye over the past 24 hours. - Morgan Stanley spots [higher mentions of efficiency on earnings calls.](
- Germanyâs[office property slump]( accelerates with record drop.
- In Biden-Trump rematch, [the only sure loser is China.](
- The UK will this week learn if it [entered a recession last year.](
- Ship in Red Sea [signals all-Muslim crew]( to avoid Houthi attack.
- The Chiefs won the Super Bowl, but who won the [battle of the ads](? And finally, here's what Joeâs interested in this morning If you think about the period from roughly the middle of 2021 to late 2022, it was a time of booming growth and a robust job market. But we know of course that sentiment was dismal, pretty much for everyone, from business leaders to households across the income spectrum. [Something I've been thinking about]( is that while this clearly wasn't a recession in terms of how economists think of the term, or how the NBER goes about defining one, it was like a recession in that it was for many a period of economic distress. Inflation was shooting higher. For many people, their real incomes were falling. Businesses were under extreme pressure when it came to hiring and sourcing raw materials, and so on. Meanwhile the stock market was basically dead money for two years. Anyway, people have this intuition that periods of economic pain are important in order to experience good times down the line. Maybe people have some moral reason for thinking that way. Or maybe people are just thinking about it like exercise: no pain, no gain. Or perhaps this idea comes from fasting and cleansing. Purging the rottenness out of the economy, so things can start clean and healthy. Whatever it is, it's a pretty common sentiment. Of course, pain in the short-term can be costly in the long-term. We experienced an intense recession in 2008 and 2009 and what exactly did we get for it? Our pace of housing production slowed down dramatically in a way we're still dealing with today. The labor market took years to recover. Measures of productivity were poor throughout the 2010s, so it's not like the businesses that survived the GFC were somehow better. Instead we got a grind and a slog. But maybe the most recent economic distress will bear fruit, in terms of setting us up for better long-term trends. In theory, a tight labor market is a catalyst for productivity-enhancing investments. Tight labor markets also mean many people have skills and experience they wouldn't have had otherwise. Household balance sheets are in good health. So in some sense 2021-2022 was like a recession, in the sense of widespread dissatisfaction, and material losses for many households. But the possibility is open, that from those stresses, more durable strengths can emerge. Follow Bloomberg's Joe Weisenthal on X [@TheStalwart]( Like Bloomberg's Five Things? [Subscribe for unlimited access]( to trusted, data-based journalism in 120 countries around the world and gain expert analysis from exclusive daily newsletters, The Bloomberg Open and The Bloomberg Close. [Bloomberg Markets Wrap: The latest on what's moving global markets. Tap to read.]( Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Before itâs here, itâs on the Bloomberg Terminal. Find out more about how the Terminal delivers information and analysis that financial professionals canât find anywhere else. [Learn more](. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Five Things to Start Your Day: Americas Edition newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox.
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