June 20th, as the North Pole tilts 23.44 degrees towards the sun, will mark the 2024 Summer Solstice. The longest day of the year and the shortest night of 2024 in the northern hemisphere happen when the sun sits directly over the Tropic of Cancer.
Pagan folklore leads some to wear protective herb garlands to ward away evil spirits that are said to appear during summer solstice. In Europe, where the event is known as Midsummer, ashes from traditional bonfires are believed to shield one from misfortune (or make your garden grow faster). At Stonehenge, which was constructed so that the Heel Stone aligns with the rising sun, a throng of sun seekers will gather to celebrate.
Our English word “solstice” is derived by combining the Latin words “sol” (sun) and “sistere,” which means “come to a stop.” The Latin word “solstitium“ is related and means “point at which the sun seems to stand still.”
The Federal Reserve seems to be at a solstice on interest rates. After hiking rates from near zero to almost 5 ½%, they are standing still, waiting on inflation to tilt closer to their 2% long-term target before cutting rates. Except for a handful of gravity-defying mega-cap tech stocks (NVDA, MSFT etc.), markets are bouncing around over interest rate uncertainty.
The June inflation report showed headline CPI slowed to a 3.3% annualized rate. I don’t know what is going on with bacon prices (up 6.9% from last May) though:
Internally, the data revealed several areas of high and persistent inflation. Rent prices increased .4% for the 33rd month in a row.
Tradition dictates that the Fed prefers to stand still during election years to avoid politically motivated accusations. This presidential election is shaping up to be the most untraditional one in our lifetimes. We think that recent inflation data, along with labor market softness, gives the Fed the empirical evidence to start cutting interest rates. They risk breaking something by waiting much longer to act.
Like Earth reaching full tilt on June 20th, maybe the Fed will break their interest rate standstill and start cutting before we tilt into winter solstice.
