Axonic Capital’s Peter Cecchini recently discussed the economic landscape on Bloomberg TV alongside Stephanie Roth of Wolf Research. Roth predicted a sustained inflation slowdown, anticipating a 2.5% rate in mid-2024, leading to a Fed rate cut in Q3. Cecchini agreed on inflation but focused on the shift from inflation to growth. He expressed concerns about a potential recession, attributing market expectations of 2024 rate cuts to this, not inflation. The discussion extended to Fed funds rates, with Cecchini foreseeing a recession leading to significant cuts of 100 to 200 basis points, contrasting Roth’s view of a softish landing with stabilization around 5%. They discussed market choppiness due to post-COVID data adjustments and uncertainties.
On the bond market, Roth was optimistic, citing potential in the long end of the curve with Fed rate cuts. Cecchini, emphasizing a recessionary environment, favored structured credit and agency mortgage-backed securities over corporates. Both shared perspectives on risk assets, with Roth foreseeing positive outcomes in bonds and equities, while Cecchini, noting market rally influences, stressed the importance of considering positioning, sentiment and seasonal effects.