Bond king sees further slide in 10-year as Goldman sees three straight Fed cuts

Kudos to Fundstrat’s ever-bullish Tom Lee, one of the few to correctly predict Wednesday’s dovish turn from the Federal Reserve that has unleashed bond and stock bulls.

As Lee said on X: “Powell no longer invoking Volcker— risk-on,” in reference to the ex-Fed chief who fought inflation so hard he triggered a recession. The memes (this one relayed from Macro Tourist’s Kevin Muir) have it:

Lee, incidentally correctly called the 2023 equity rally and alongside Oppenheimer, holds the most bullish S&P 500 forecast for 2024 of 5,200.

Onto our call of the day, from Jeff Gundlach, chief investment officer and founder of DoubleLine Capital, who expects the 10-year Treasury yield
— down a further 8 basis points on Thursday at 3.946% — to hit “the low threes by the end of next year.”

Gundlach made his comments in a CNBC interview late Wednesday, as he predicted unemployment will shoot up next year and inflation dip to 2.4% by June, triggering a rate cut. “The economy is going to undershoot the downside and that is going to create a response. We will have to have a lot of money printing.”

Incidentally, Bill Gross, the billionaire investor and Pimco co-founder, doesn’t agree with Gundlach, saying in an X comment that 3% Treasury yields are “farcical.” Given a typical term premium, the Fed cutting rates down to 3% would mean the 10-year would be around 4%, Gross said.

Meanwhile, Gundlach weighed in on the bullish market reaction in the Fed’s wake. “I just think the everything rally concept is a realization of what’s happened in the past six weeks, and we kind of expected that,” he said.

While the Fed was “pivotish,” in November, which kicked off the stock and bond rally, a full pivot has now been made, says Gundlach. And as “we’re getting late in the cycle,” higher credit sectors — not investment grade — “double B sectors” or junk sector parts of the bond market are worth a look.

Gundlach isn’t as optimistic on the stock market.

Gundlach invoked an old market saying. “Stocks need bonds, but bonds don’t need stocks. And right now stocks are needing bonds and they’re getting it. But we’ll get into that phase I think in the second quarter or so next year where bonds don’t need stocks, but stocks won’t be participating the way bonds will. So that’s how I think about the pivot, but I also think it’s going to be a year for of great volatility in 2024,” he said.

Read: Wall Street has discovered what’s really driving U.S. stocks higher in 2023. The explanation isn’t as simple as one might expect.

And to how much the Fed will cut next year, the debate is thick and heavy, with eyebrows raised as markets are pricing in up to six cuts.

A Goldman Sachs team led by Jan Hatzius said they see “earlier and faster” moves — three straight 25 basis points cuts in March, May and June.

“Financial conditions eased further today, and we are more confident that the large easing since October will prove durable now that the lower inflation path makes substantial rate cuts more likely next year,” said the Goldman team.

The markets

Stock futures


are up, with the Dow
set for a fresh record. Bond yields

are at fresh multimonth lows, as gold prices
climb over 2% to $2,050 per ounce. The pound
shot up after the Bank of England left interest rates unchanged, but said they’d need to stay higher for an “extended period.”

Oil prices

are up 2%. The International Energy Agency said oil demand will weaken next year.

The buzz

Weekly jobless claims, import prices and retail sales are all due at 8:30 a.m., with business inventories at 10 a.m. The ECB will hold its policy meeting later. Follow the action in MarketWatch’s Live Blog.

delivered a disappointing outlook and revealed an Federal Trade Commission probe, with shares down.

jumped 7% the biotech and partner Merck 
 announced positive data from a mid-stage trial of a combined treatment for advanced melanoma. 

Occidental Petroleum
is getting a boost from news Berkshire Hathaway 

bought the shares on Dec. 11, the same day the oil producer said it was buying CrownRock. Staying in that sector, BP

was cut to underweight from neutral at JPMorgan.

and Costco
will report results after the close.

Russian President Vladimir Putin said there will be no second call up for reserves and his Ukraine “de-Nazification” goals remain the same.

Best of the web

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The chart

Move over Nvidia
retail investors are falling in love with other semiconductors, such as Advanced Micro Devices
says the Vanda Research team. Here’s their chart:

And if Fed members don’t push back on that dovish Wednesday message, then AMD’s gains may only grow as it has “significantly lagged” Nvidia’s 2023 climb, says Vanda. And if semi stocks momentum “persists, then individual traders could easily make AMD their new #1 pick as they attempt to push the stock to close the gap with its main competitor,” they said.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:


Security name






AMC Entertainment



Advanced Micro Devices


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