Morgan Stanley with the note. I 100% agree.
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2022 has been a year of extraordinary hawkishness from the Fed, and it continues to surprise on the upside with both its formal guidance and informal communications. This had led to almost weekly revisions for more Fed rate hikes from just about everyone, including our economists who now expect 50bps hikes in both May and June and then 25bps in every meeting thereafter. The bond market has definitely gotten the message, too, with one of the steepest rises in front end rates ever witnessed (Exhibit 1). Back end rates have also adjusted as the expected terminal rate for this cycle has risen to 2.72% (Exhibit 2). The question for equity investors at this point is whether they believethe Fed will actually tighten this much and what will be the impact on the economy from a growth standpoint.
