Fed flags only one 2026 rate cut — macro cooling
The Fed projected just a single rate cut for all of 2026 and held rates near 3.5–3.75%, denting hopes of faster easing and keeping bond yields elevated — a backdrop that's making defense and space stocks more attractive as 'safe havens.' That macro stance tightens hiring budgets in some sectors while defense primes remain resilient. (reuters.com)
The Fed’s March Summary of Economic Projections shows the median FOMC participant expects a 3.4% federal‑funds rate at year‑end 2026 and a shift in the dot‑plot toward fewer reductions (more members clustering around 1 or 0 cuts). (federalreserve.gov) Long‑term yields have stayed high: the 10‑year U.S. Treasury traded around the low‑4% range in late March and 2‑year yields pushed near the high‑3%s following the Fed updates, a repricing that left futures markets largely discounting an early 2026 cut. (investing.com) Aerospace & defense equities have outperformed as investors seek durable revenue streams: the iShares U.S. Aerospace & Defense ETF (ITA) showed roughly 41.9% total return over the past 12 months and was up modestly year‑to‑date in March, while sector coverage in analyst reports highlighted flight‑to‑safety flows into prime contractors. (financecharts.com) Prime contractors’ order books and program backlogs underpin that resilience — Lockheed Martin reported an unusually large backlog in its 2025 results and industry studies note sustained A&D revenue and modernization demand amid geopolitics and higher defense budgets. (gbp.com.sg) At the same time, labor metrics show cooling: the Chicago Fed’s March hiring‑expectations diffusion index printed about ‑27.3, many firms disclosed hiring slowdowns and trackers logged more than 1,600 companies announcing layoffs or freezes so far in 2026, tightening hiring budgets outside defense. (fred.stlouisfed.org)
