Fed will lower rates three times and a total of 75 bps this year: Marathon Asset's Bruce Richards

Core Viewpoint - The Federal Reserve is expected to cut interest rates by 25 basis points in the upcoming meetings, with a total reduction of 75 basis points anticipated over the next three cuts this year, while the market has priced in a 100% probability of these cuts [2][3]. Economic Indicators - Current inflation is at 3%, while the Fed's target is 2%, indicating a willingness to accept higher inflation due to weak job data, but there is little risk of recession or stagflation, with a projected GDP growth of 3% for the quarter [3][4]. - The previous quarter's GDP growth was reported at 3.3%, suggesting a stable economic environment despite inflation concerns [4]. Market Sentiment - Equity markets are at all-time highs, which suggests growth rather than recession or stagflation, as typically, such economic conditions would lead to declining equity markets [5]. - Credit spreads in the high-yield market are at 300 basis points, indicating no imminent recession or stagflation [5]. Investment Opportunities - There is a significant upcoming stimulus package and increased capital expenditure (capex) spending, particularly in AI and data centers, which is expected to drive further economic activity [6][7]. - The public markets are performing well with tightened spreads and lower rates, presenting opportunities for alpha generation through new issuances [8]. - In private credit, there is a prolific period of direct lending, with multiple deals being approved, particularly in the private equity sector [9][10]. Lending Strategies - Direct lending is experiencing unprecedented activity, with lower interest rates expected to facilitate more deals and refinancings, enhancing transaction volumes [10][11]. - Asset-based lending is also thriving, with attractive loan-to-value (LTV) ratios and strong returns, providing a margin of safety [12][13].