Is The Fed Close To Ending The Rate-Hiking Cycle?

If you no longer want to receive these messages, you may [click here]( to unsubscribe. [CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS]( Hello investor, Is The Fed Close To Ending The Rate-Hiking Cycle? Wall Street cheered the promising inflation data that showed the CPI gaining just 3% in June from a year ago, sparking bets of the central bank ending its rate-hiking cycle after one more hike this month. Two-year Treasury yields plummeted by 13 basis points to 4.74%. The dollar fell to a 15-month low. Both showed that Wall Street believes the central bank is almost done with hiking. The core CPI, which excludes energy and food prices, came in at 4.8%. That was still high. But it was also the lowest since 2021. The central bank views this as the better indicator for underlying inflation, so Fed officials are likely to insist that there is more work to do. - “It’s too early to pop the champagne, but it’s not too early to start chilling the bottle,” said Ronald Temple, chief market strategist at Lazard. “Better-than-expected data increases the likelihood that a Fed rate increase on July 26 will be the last of this cycle.” Ronald Temple, chief market strategist at Lazard (Photo: Blooomberg) Could the Fed start cutting rates soon? Megan Horneman of Verdence Capital Advisors doesn’t think so. The Fed may prefer to keep rates unchanged if they were to pause. - “I think it’s a good report. Inflation is going the way that the Federal Reserve wants it to go. But I don’t think we’re ready to say that they’re going to be able to cut rates,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. - “There’s still three areas of the inflation that the Fed’s looking at very closely — service inflation, wage inflation and housing inflation. All three of those things, while they are moderating, are still uncomfortably high,” Horneman added. Right now, traders see a 95% certainty that the Fed will hike by 25 basis points on July 26. What about the September meeting? Wall Street assigns a 13.3% probability of a hike. So, the sentiment is overwhelmingly in favor of the final hike happening in July. However, some analysts are skeptical that inflation will go down to the Fed’s 2% target if the rates remain around the current level. The “final mile” can be the hardest part of the battle. Rhys Williams of Spouting Rock Asset Management pointed out that the combination of a labor shortage, low immigration and federal stimulus can make bringing inflation down to 2% very difficult. - “Ultimately, given a chronic shortage of labor, lack of immigrants and a lot of Inflation Reduction Act money to stimulate new factories and Capex projects, we are skeptical that inflation can really go back to 2%,” said Rhys Williams, chief strategist at Spouting Rock Asset Management. - “Ultimately, the Federal Reserve will have to decide whether an inflation rate under 3% is good enough.”  The High “FCF Yield” Stock To Buy Right Now Today’s Stock Pick: CNX Resources Corporation ([CNX]() CNX Resources is an independent oil and gas exploration and production company, and natural gas is its specialization. Obviously, the time is good for natural gas companies. The company is set up for a monster year of Free Cash Flow. How much are we talking about? The company expects to generate ~$250 million in FCF, and the market cap is $2.98 billion. That’s right – we are talking about an 8% FCF yield. (Source: CNX Resources) As a result, CNX has reduced about 28% of its total shares outstanding since Q3 2020. CNX has hedged greater than 80% of this year's production. That eliminates much of the potential upside in gas prices, but it also protects against the downside as well. So, the visibility of its FCF is clear. You can be sure that most of it will be returned to shareholders. CNX has returned more than 20% of its market cap in the last 12 months. (Source: CNX Resources) The company projected a big 32% CAGR for FCF per share from 2020 to 2026. What’s more, the FCF per share is expected to double in 2026 from 2022. Will the company achieve this ambitious goal? We don’t know, but the margin of safety is massive with this stock. Disciplined production: In the past, shale operators would chase over growth at all costs. Not anymore. Many of them become disciplined and keep its production level stable, despite the surging natural gas prices. That’s difficult to resist – it’d be a quick buck to boost production and earn profits on these elevated prices. But with the production level being stable, CNX Resources will have ample room to generate high FCF. For the year of 2023, CNX will keep its production level similar to 2022 with its guidance to produce about 560 Bcfe. Bottom line: CNX Resources is all about free cash flow, and its yield is expected double digits this year. Many of them would go to shareholders, so it would represent a double-digit return purely from share buyback. That’s a return you can bank on, unlike most stocks in the shaky market.   [CLICK HERE JOIN OUR LIVE TRADING & TRAINING SESSIONS](     © All Rights Reserved, Trade Alliance