The Federal Reserve is anticipated to cut interest rates in September following Fed Chair Jerome Powell’s dovish comments in his Jackson Hole speech last week. However, Wall Street is now considering the impact of rate cuts as markets (^DJI, ^IXIC, ^GSPC) begin pricing them in.
FS Investments chief market strategist Troy Gayeski joins Catalysts to discuss rate cut outlooks and sheds light on his market perspective.
Gayeski notes that while markets are recovering after early August corrections, equities are entering “a pretty ugly seasonal period historically.” He also notes that current market valuations are exceptionally high, advising investors to “focus on growth at a reasonable price.”
Regarding the anticipated Federal Reserve rate cuts, Gayeski states, “This is one of the few times where markets are actually aligned with reality.” He predicts three cuts before the end of 2024, with an additional three to six cuts in 2025, suggesting this could help stave off a recession.
However, Gayeski cautions, “If the Fed ends up cutting more aggressively, that basically lays out the scenario you’re discussing, where we are going to enter an unexpected recession. And that point, clearly, equities will go through a meaningful dislocation.”
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