Many on Wall Street have affirmed that the Federal Reserve is just about ready to begin cutting interest rates, starting at its September policy meeting in two weeks. But at what pace is the central bank willing to cut basis points?
Morningstar chief US market strategist David Sekera joins Market Domination to give insight into market movements and how the Federal Reserve will act moving forward.
Based on current market trends, Sekera finds the stock market (^DJI, ^IXIC, ^GSPC) “pretty fully valued. In fact, it’s actually a couple percent above a composite of our fair values. So not necessarily surprised to see a little bit of choppiness, a little bit of a pullback here in the short term”
“We’ve been in the soft landing camp for quite a while. We’re actually looking for GDP [gross domestic product] in… this current quarter here to slow down to 1.7%. We expect it to slow sequentially through the end of the year, getting all the way down to 1.2% in the fourth quarter,” Sekera outlines.
Sekera goes on to say that he would “be very concerned” if the Fed were to cut rates by 50 basis points:
“I think at this point, the market’s fully baked in the 25-basis-point cut. So I don’t really think there’s going to be a huge market reaction to the Federal Reserve. We’re looking at 25-basis-point cuts at each of the meetings thereafter. So we’re looking at, by the end of next year, the Fed to get down to about 3 to 3.25% range by the end of 2025.”
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