After the latest employment report almost completely shattered hopes of a "July first cut," some analysts further predicted that the Federal Reserve would not cut interest rates at all this year.
This is more pessimistic than what investors are currently betting on, as the CME Federal Reserve observation tool shows that the market currently expects at least one 25 basis point rate cut in 2024. This is a huge shift, as just at the beginning of this year, the market expected the Federal Reserve to cut interest rates 7 times this year.
However, in the view of Lori Calvasina, head of US equity strategy at Royal Bank of Canada (RBC), even a single rate cut would be more. When the US stock market continues to digest expectations of easing monetary policy, but ultimately the Federal Reserve does not take action, then the US stock market may fall.
She said that if interest rates were not cut this year, inflation would still be more difficult than expected, and the yield of treasury bond bonds would remain high, then the benchmark S&P 500 index might fall to a low point of 4900, 8.6% lower than the current level.
Other analysts also point out that the Federal Reserve has reason to maintain higher interest rates for a longer period of time.
Ed Yardeni, the president of investment consulting firm Yardeni Research and a long-term bull on Wall Street, said that the Federal Reserve should "take a break" and keep interest rates unchanged until 2024. In his view, the central bank has successfully normalized interest rates to the appropriate level, and this has not harmed the economy.
"If they lower interest rates unnecessarily, they may lead to the collapse of the stock market, which will bring about other problems, as we saw in the late 1990s - the bursting of the stock market foam," he said.
He also added that the market can predict that there may be one or two interest rate cuts in the next 12 months, but it will never be before the end of this year.
At the same time, Catalyst Capital analyst David Miller also believes that the Federal Reserve should not cut interest rates in 2024, as this would lead to increased inflation.
Of course, there are also people who hold opposite views. For example, Moody's Chief Economist Mark Zandi warned on Monday that the longer interest rates remain high, the greater the likelihood of an economic collapse.
"In my mind, this system is like an engine, shaking violently under the pressure of higher interest rates. So far, with the help of some" pipeline tape "(including the Federal Reserve and banking regulatory agencies), it has remained stable. But how long can this last?" he said.