When the debate around the topic of recession or soft landing among economists and investors is still heating, new round debate about rate cuts is looming.
The Fed indicated in its minutes for December meeting that three rate cuts are foreseeable, but the markets which have been over optimistic have priced in at least six rate cuts. The sort of narrative from the Fed made the markets disappointed. After nine straight sessions of gains, Wall Street took an abrupt turn around, leading the S&P 500to suffer its worst daily losses since September.
So if six rate cuts is feasible; when will it start, the first half or the second half? When the Fed will start to cut rates, if it will be as aggressively as it hikes rates? A lot of question marks are left to the markets.
Anne Walsh, Guggenheim Partners Investment Management CIO suggests that the economy will continue to slow down, inflation will also be in deflationary track. Additionally, she said the evolving economy is kind of bifurcated economy, some companies are doing pretty well, and other sections of the economy are really slowing down significantly, such as manufacturing has been slowing down even in a recession over the last 12 to 18 months. As a result, she said “we are seeing a bifurcation of the economy”.
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