What Happened: On Monday, macro strategist Craig Shapiro shared his views on X, commenting on the narrowing odds of an interest rate cut by the Federal Reserve following the de-escalation of the trade war with China.
He says the odds in favor of an aggressive rate cut were spurred by the China trade embargo increasing potential “left tail economic outcomes,” which essentially refers to unexpected or severe economic events hitting growth and employment figures this year.
However, with a tentative 90-day pause in tariffs on China now in place, Shapiro said, “the Fed should feel even more comfortable with their idea that a long pause makes more sense.”
Shapiro argues that the fallout from earlier tariff shocks, paired with worsening fiscal dynamics, could push the Fed to hold rates steady longer than investors expect. …