PCE: Wall Street poised for new highs when Fed pivots in September?
When the Federal Reserve cuts interest rates at its September meeting, as is now widely expected, Wall Street could hit fresh highs, predicts the CEO of one of the world’s largest independent financial advisory and asset management organisations.
The bullish prediction from Nigel Green of deVere Group comes as the Fed’s preferred inflation gauge (PCE) for July showed a sustainable trend of disinflation.
He says: “There’s really no way that the Fed isn’t going to cut rates in September. The question now is – how aggressively will they move?
“We are pushing for a supersized 50-basis point cut next month.
“With rates currently sitting at a more than two-decade high, there’s no room for hesitation. A 25-basis point cut might signal a shift, but it’s not the aggressive action needed to stave off a potentially devastating hard landing.
“The case for a bold 50-basis point cut in September is clear. This move would send a powerful signal that the Fed is serious about steering the US economy away from the brink of a recession.
“Follow that with two more 25-basis point cuts in November and December, and the Fed would not only be addressing immediate concerns, but also setting the stage for sustainable economic growth.”
The potential for a rate cut has Wall Street buzzing with anticipation. After months of uncertainty and mixed signals from the Fed, a decisive move in September could spark a new rally in the stock market.
“If the central bank delivers a significant rate reduction, we would expect to see major indexes like the S&P 500 and NASDAQ reach fresh highs next month,” predicts the deVere CEO.
“The tech sector, in particular, stands to benefit from lower interest rates. Cyclical sectors, such as consumer discretionary and industrials, could also see a resurgence as consumer spending and business investment pick up in response to the Fed’s action.”
However, this rally wouldn’t lift all boats equally. Investors must be discerning in their stock picks.
“While lower interest rates will benefit many sectors, not all companies are positioned to capitalize on the potential market upswing. Strong balance sheets, consistent earnings growth, and sustainable business models will be key to the new landscape for investors,” notes Nigel Green.
As Wall Street braces for a potential breakout next month, all eyes are on the Federal Reserve.
He concludes: “The PCE data Friday pushes the case for a bold 50-basis point rate cut in September, which we believe would be the catalyst for fresh highs on Wall Street.
“Investors are ready to seize the opportunities.”