Did you know that endorsements from high-profile business leaders, like Blackstone's Stephen Schwarzman, can impact investor confidence and market trends?

Only time will tell, but perhaps with Blackstone taking the lead, others will follow in their footsteps.

Besides that, here’s a sneak peek at what you’ll find in today’s edition:

• Goldman Moves Back Rate-Cut Forecast: First, we’ll discover why Goldman Sachs has adjusted its prediction for the Federal Reserve's interest rate cuts 📅

• How Low Can Rates Go In The Long Term? The Fed’s Waller Has A View: Next, we’ll look into Fed Governor Christopher Waller's perspective on the elusive neutral rate of interest, R* 🧐

• Blackstone’s Chief Executive Backs Trump: Finally, we’ll learn about Stephen Schwarzman's endorsement of Donald Trump 🏛️

Stay informed and ahead of the curve with our expert insights and analyses. Happy trading!

Goldman Moves Back Rate-Cut Forecast 📅

Goldman Sachs economists now predict the Federal Reserve will cut interest rates in September, rather than July.

It’s a recalibration that matches the broader view and reflects the challenge of nailing down the timing.

Goldman changing its forecast of a July rate cut shouldn’t come as a shock 🤷🏻

Fed Governor Christopher Waller effectively ruled out the possibility of a summer cut in his speech this week.

The investment bank’s September forecast now matches market expectations.

According to the CME FedWatch Tool, prices of interest-rate futures show odds of 52.2% that a cut will come in September, versus only a 12% chance in July.

The bank left its expectation of two cuts in 2024 unchanged.

It predicts a second reduction of rates in December ❄️

How Low Can Rates Go In The Long Term? The Fed’s Waller Has A View 🧐

Interest rates may remain higher over the course of the coming economic cycle than they were in the low-rate 2010s, but the jury is still out, according to Fed Governor Christopher Waller.

Waller is focusing on the growing debate over where the so-called neutral rate of interest, R-star, lies.

The issue sounds technical, but it has implications for Fed policy over the long run.

R-Star, often referred to as R*, is a theoretical concept in economics.

Unfortunately for economists and market participants, the neutral rate isn’t measurable in the moment—unlike bond yields or the unemployment rate—and it is only somewhat observable in hindsight 😵‍

R* refers to the inflation-adjusted, or real, interest rate under which demand for savings and investment in the economy is at an equilibrium.

A benchmark interest rate at neutral neither fuels nor restricts growth and inflation.

Put another way, it means that monetary policy is neither tight nor loose.

“Think of R* as the level of the real federal funds rate once all the cyclical ups and downs of the economy have been factored out, including near-term policy tightening or loosening that sometimes is necessary to move employment and inflation back to the FOMC’s goals,” Waller said.

Over time, the economy should approach equilibrium and the real fed-funds rate should equal R*.

Fed officials’ latest economic projections, from March, put the median estimate of the longer-run federal funds rate at 2.6%, which was up by a tenth of a point from forecasts given three months earlier.

Subtracting the central bank’s 2% inflation target yields an estimated neutral rate of 0.6%.

“As a policymaker, it is important to understand what is driving any movement in R* to justify using it to guide my policy deliberations,” Waller said.

“One cannot simply claim R* has risen based on gut feelings; there must be a reasonable economic explanation for why it has risen or fallen” 🤔

Waller pointed to the liberalization and globalization of capital markets, which made foreign buyers among the largest holders of Treasuries, aging populations that value risk-free income-generating assets, and stricter financial regulations that push banks to hold more Treasuries.

Those have increased demand by more than supply in the past 40 years, Waller said, pushing the 10-year yield and R* lower.

Waller doesn’t see any of those demand-side dynamics reversing, but he noted that the U.S. government’s heavy borrowing to finance persistent budget deficits was unsustainable.

“If the growth in the supply of U.S. Treasuries begins to outstrip demand, this will mean lower prices and higher yields, which will put upward pressure on R*,” Waller said.

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Blackstone’s Chief Executive Backs Trump 🏛️

Blackstone chief executive Stephen Schwarzman has endorsed Donald Trump for president as a “vote for change”, the latest sign that Republican megadonors who had been critical of the former president are uniting behind him.

Schwarzman cited “the dramatic rise of antisemitism” as part of the reason for returning to Trump’s camp, adding that he believed President Joe Biden’s policies were misguided.

“I share the concern of most Americans that our economic, immigration, and foreign policies are taking the country in the wrong direction,” Schwarzman said in a statement on Friday.

“For these reasons, I am planning to vote for change and support Donald Trump for president” 🗳️

Inner Circle Global Macro Update 🔍

For today’s edition of Equity Eats, there will not be a Macro Update, as our esteemed economist Seth Antiles will be on a business flight.

Fear not, we will continue giving you our exclusive, behind-the-scenes insights on Monday, so stay tuned!

We thank you for your understanding 🙏

In the meantime, if you haven’t already, be sure to upgrade by clicking the button below to receive a goldmine of stock market secrets with every edition 👇️