On CNBC, they pointed out that US Federal Reserve Chairman Jay Powell, commenting on the latest rate cut, said that another cut was far from certain. And he also mentioned the risk of stagflation. Jeremy Siegel of the University of Pennsylvania said that the December rate cut is really an open matter. And the Fed's current outlook and approach «may slow down the bull market, but probably won't stop it.»
Siegel added that «we still have six weeks left and they will be important.» By then, according to the professor, it will be clearer how consumers react to the introduction of some tariffs. At the same time, there will be more information on how AI affects the labor market. The question is whether, despite the government shutdown, the Fed will have enough data to work with and find out the necessary information from. Siegel thinks so, and concluded with the following: The Fed is behind us, if the economy slows, it will cut rates. If not, he can wait and decide in January. The economist also said he thinks the US Federal Reserve should be «a little bit lower» with rates now. He also pointed out that ten-year government bond yields hover around 4.1%. At the same time, according to some opinions, the reduction of rates should have brought a drop in these yields significantly below 4%. However, according to the professor, he always believed that lower rates would lead to a «normalization» of bonds. So a clear shift of short-term rates below longer-term ones.
Regarding the stock market, the expert said that «the AI story is still alive», the profitability of traded companies is also good, and in addition, companies give a good outlook for the next quarter. The stock market could thus continue to rise, but «the Fed's caution will slow it down a bit.» Andrew Slimmon from Morgan Stanley Investment Management presented an alternative view on CNBC. He believes that the market is showing signs of speculation and is moving into a late growth phase. According to the expert, an «aggressive» rate cut by the American central bank could significantly fuel speculative pressures in such a situation and thus eventually send the market into a correction. A slow rate cut, on the other hand, would prolong the bull cycle. Siegel believes that the stock market does not currently face significant threats, the exception could be the deterioration of consumer sentiment due to the US government's tariff policy. How does Ed Yardeni of Yardeni Research, who was also a guest on CNBC, see the situation? According to him, Jay Powell has decided to cool down the enthusiasm in the stock market, but the overall situation in the economy is good. And «lower rates won't solve the problems the labor market is in.» Yardeni believes that the decisive factor will be the profits of traded companies, which are positively surprising so far. The market as a whole is affected by a number of things, and the expert thinks that it can add a few more percentage points of growth by the end of the year. Corrections cannot be ruled out either, but the overall mood is optimistic and Yardeni expects a 10% increase in the S&P 500 index for next year. Regarding monetary policy, he said that, unlike in the past, there are many different opinions in the leadership of the Fed, according to him, the economy does not need another drop in rates this year. If he did come, he might rather increase financial instability. In this respect, Yardeni thinks similarly to the aforementioned Slimmon from Morgan Stanley Investment Management.
Source: CNBC