This year, there is a chance the Federal Reserve will meet market expectations and cuts interest rates. And as a result, it will be more to soothe dwindling confidence than to focus on any particular concerns.
Aside from that, growth might not catch up with the fast pace of 2018 and the first quarter of 2019. Also, it is still unfurnished to reverse and take the country into recession.
However, the financial markets, as well as the White House, wants a rate cut. And their wish might come true before the end of the year.
Chief investment strategist of Leuthold Group, Jim Paulsen stated, “the biggest thing they possibly could accomplish is more sentiment and mental than it is fundamental.”
“Risk becomes greater the longer you wait. If you go early you’ve got a better shot of turning sentiment than when the data tell you that you have to ease,” the chief investment strategist also added.
In addition to that, Paulsen also shared his thoughts about whether the Federal Reserve should cut or not. He said that he’s not sure if the Fed will cut rates, or if they have to. But he is worried on the sentiment freeze.
Interest Rate Cut
While Paulsen is uncertain on the rate cut, the markets are expecting at least two of them.
Furthermore, futures traders are nearly fully priced in the two rate cuts before the end of the year. The possibility of the first reduction in the Federal Reserve funds rate was about 89% in September. And the second easing stood around 83% in December.
Moreover, some strategists are more assertive in their expectations. For example, Barclays foresees a 75-point basis reduction before the end of the year. Another one is the Evercore ISI, which expects three cuts, the last one will be in March 2020.