June’s Personal Consumption Expenditures (PCE) came largely in line with expectations, reinforcing confidence in a September interest rate cut from the Federal Reserve. Insigneo Chief Investment Officer Ahmed Riesgo joins Market Domination to break down the print and what it signals about the overall state of the economy.
“We certainly think the Fed is going to cut in September. I mean, the market’s also telling you that they’re betting very heavily on that. In fact, the market is starting to price in potentially more than 25 basis point rate cut in September. We don’t think it’s going to go that far. We think there will be one. But really, we think the Fed should have been cutting rates already,” Riesgo explains. He adds that bad news has been good for the markets recently, however, he believes that it will change as higher risks of recession are “currently being reflected into asset prices.” He believes that in the second half of the year, some of those risks will resurface.
He adds, “what matters for consumers is real rates in the economy, not just the Fed funds rate. So a lot of times, it takes a while for those to trickle down and actually start having an impact on people’s wallets, on loan balances, and the like.” He believes that the Federal Reserve’s interest rate cut in September is too little too late in preventing a recession, which he anticipates to begin either by the end of 2024 or the beginning of 2025. Riesgo points to cracks in the labor market and weakness in the lower-income segments of the economy as signals of an incoming economic downturn.
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