Evergreen Gavekal’s Chief Investment Officer David Hay expressed his doubts about the FED’s interest rate cuts, saying, “There will be a cut, then it will end, and I’m not even sure about one.”
In a blog post he wrote last week, Louis-Vincent Gave, the company’s chief economist, said the possibility of the Fed cutting interest rates was due to inflation exceeding expectations, the rise in fuel prices, gold rising to record levels, cryptocurrencies and “fervent speculation” in some parts of the stock market. He stated that it weakened due to the increase in bond yields and the “depreciation” of the dollar.
Marko Kolanovic, head of JP Morgan’s global market strategy team, raised the question of controlling inflation in the face of booming stock and cryptocurrency markets that are adding trillions of dollars of paper wealth. Kolanovic pointed out that historically loose monetary conditions have led to significant increases in consumer price index values. As a result, Kolanovic thinks there may be higher interest rates for longer.
Like many market watchers, Hay and Gave think the Fed may opt to cut rates in June, before political conventions and the presidential campaign ramp up. But looking at presidential election years since 1994, when the Fed began publicly announcing policy changes, Bespoke Investment Group found that the FOMC kept interest rates steady 71.2% of the time and raised them 15.3% of the time. The periods when interest rates were reduced by 13.6% were the financial crisis in 2008 and the Covid period in 2020.
*This is not investment advice.
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