Wall Street’s Interest Rate Reality Check is Here…

Well, well, well…

Fellow Moneyballers, if you’ve been following this publication for any amount of time, then you’re probably already used to it. It keeps happening over and over, after all.

Yet somehow, the joy of discovering that we got it right — and Wall Street got it wrong — just never gets old for me.

Because once again, your man Andrew Zatlin wasn’t afraid to make a bit of a “rogue” prediction. As I explained back in January, I’ve been seeing signs of a strengthening economy. So while Wall Street’s top financial wizards were loading up their portfolios in anticipation of at least two more rate cuts in 2026, I was warning readers that the Federal Reserve might hold steady through the end of the year.

“Zatlin, you’re crazy!” they cried. Presumedly.

And once again, the reality check arrives. And we’re the only ones ready to cash it.

Let’s talk rate cuts (or the lack thereof), what that means for the market, and how you can prepare your portfolio to profit.

Hit the video below to dive in:

Video transcript:

Welcome to Moneyball Economics, I’m Andrew Zatlin.

For the longest time, I have felt like a lonely voice preaching in the wilderness.

I’ve been saying that the US economy is poised for significant growth. I’ve been saying that we would start to see clear and consistent evidence of that in the economic data the closer we got to April. And that because the economic data would start to signal consistently growth that any rate cut had to come before the end of April, after which we would start thinking rate hikes towards the end of the year.

Well, needless to say, this has been diametrically opposite what consensus Wall Street views are.

Wall Street expects the US economy to be muddling through this year. They expect at least two rate [cuts]. Now, the implications are if I’m right and it’s so different from Wall Street expectations, then Wall Street is having to reposition as a result of reality.

And that means some pretty volatile movements in the stock and bond markets. Because what it means is a shift from good news is bad news, meaning good news runs counter to their view that we are in a muddling through economy.

And instead, they’ve got to embrace the concept that good news is good news. And that means they’ve got to change their positions accordingly.

So today, I would like to focus on why April is such a pivotal month for this economic data and what data we should be looking at. Also, I’d like to sort of walk through what the implications are for the markets…

So right off the bat, economic data is always laggy. It’s always backwards looking, and sometimes it’s really backwards looking. For example, we’re knocking on the door of April and we just now got a release of what’s going on for the fourth quarter last year, meaning October data, November and December, months and months ago. Stuff that doesn’t really relate to today.

Instead, most data that comes out is going to be at best, typically one month old. Usually it’s two months old.

And that matters now, especially because February is when companies are finally back in from vacation, butts are in seats, and they’re putting into action their strategic plan. The plan that says for the next year, here’s how we are investing. Here’s how we’re hiring.

These plans start in February, which means we’re not going to see them by and large until we get to March at the earliest and usually April. And that’s why I’ve said April is the do or die month for getting real line of sight as to what companies are planning.

So let’s refocus on that just a little bit. And we’ve seen some economic data come out, but again, it talks about January and we’ve gotten February storms and even other things going on.

This week though, we got some really key data points. We got what was going on with inflation for last month, February, what’s been going on in the factory space, and what’s been going on with hiring, and all three consistently pointing to economic growth.

As a result, the Federal Reserve came out this month and said no rate cuts. Again, consensus wants two. I believe that April is the last month to do a rate cut, and I don’t think it’s going to happen because already the economic data is signaling growth. Let’s focus in on the three data points that came out this week, because again, I’ve been saying it’s a steady drumbeat and we’re starting to see it.

Right off the bat, my favorite data point, jobless claims. I love jobless claims because high frequency. They come out weekly, so there’s not a lot of lag. Secondly, it’s kind of unmolested data.

There’s not a lot of modeling to it. And thirdly, it’s comprehensive. It’s going across the entire United States. Well, this data point came out and it surprised consensus. Jobless claims dropped significantly, as I had predicted they would. Now, for my follow-on prediction, I believe jobless claims are going to continue to go down and stay down. And that’s because I’m looking at the labor market. I believe that the US economy is a coiled spring, that they went too lean last year, and that we’re going to see nothing but growth, and that growth is going to drive a lot more hiring, a lot less firing, and a lot of expansion and some inflation.

So what I expect to see going forward is not just that firing’s going down as reflected in jobless claims, but in the second category of jobless claims, what’s called continuing claims. So if initial claims are someone walking in saying, “I just got fired this week,” that’s taking a snapshot on the firing perspective, what companies are doing to cut their labor force, and that’s low.

It’s the hiring perspective that comes out when we look at something called continuing claims because continuing claims are people who’ve come back and said, “It’s been two or more weeks. I haven’t been able to get a job no one’s hiring.”

Well, guess what? Continuing hiring claims dropped and they’re lower than they were last year. Now, continuing claims are going to come down because there’s hiring going on. So right off the bat, we have a strengthening labor market where we’re seeing no firing and some hiring.

All right, fast forward a little bit. Now we want to talk about inflation. Well, inflation went up. That’s really important. Inflation goes up because there’s underlying demand, and that’s what we’re seeing. Not that inflation soared and is indicating whatever. It just means it’s not going down any further. And that’s a surprise to the Fed. Who expected that there would be some growth, some pull down?

And as a result, they’re not doing interest rate cuts. But it’s the third data point that I find interesting. Let’s go back in time. Exactly. One year ago, we had the tariffs kicking in. We had companies stockpiling inventory and basically pulling back on production. We had layoffs. We had a drop in factory activity.

Guess what? One year later, we’re seeing now the exact opposite. See, companies got too lean last year. And coming in, we’re starting to see that need for inventory is getting desperate. We’re seeing new orders surge.

And in response, there’s a data point that reflects that factories are coming online and starting to accelerate the production. It’s kind of an obscure data point. It’s collected every month. It’s called factory. It’s called, excuse me, manufacturing capacity utilization. What that means is how much of the factory is vacant or not, kind of like a hotel.

Well, guess what? For the past few months, factory utilization has been kind of low-ish. Manufacturing capacity is this big, and the utilization of it has been kind of dwindling, except this last month where it grew a lot.

And that’s because we’ve got domestic new orders and international new orders pouring in. Trump is succeeding in driving forward onshoring of manufacturing and pushing for manufacturing renaissance. So we’re going to see growth coming out of that sector, and that’s going to drive growth elsewhere.

It’s going to change the minds that, in fact, we do have economic expansion underway. So going forward, what I expect to see is more and more of these green shoots coming out more consistently, which means next month, no rate cut at all. That’s going to be a big surprise. Markets are going to have to adjust because up until now, they’ve been under the view that bad news is good news.

Bad news signals the economy’s slowing down. A slowing economy means we’re going to get rate cuts and they put all their money on that. It’s like betting on red at the roulette table. And now I’m coming out and I’ve been saying you don’t want to be on red, you want to be on black.

So if you’re going to move your bets, you got to move to black. Companies out there on Wall Street, the funds need to now start changing their positioning. They’ll make money on either one, but they just got to be in sync with what’s going on.

So the more that they start to understand that this economy’s growing, that it’s all good news and that we’re not going to get rate cuts, the more they’ve got to change their positions. That is bad for the bond market because they expect rates to stay flat or even go up.

That means bond prices are going to go down. And for the stock market, they’ve got to also change their positions accordingly.

Expect some volatility, not only as we get deeper into April, but as we get closer and closer to the summertime, because funds want to lock in their positions before the summer holidays.

What I’m saying is get ready for some volatility and take advantage of the fact that you’re earlier in that we are going to see a big surge in betting on America and for the stock market to move forward once all this repositioning takes place. We’re in it to win it.

Zatlin out.