USD: 'expect US interest rate cut by second half 2024’
Economist and Regionally chairman, Justin Urquhart Stewart explains why despite a cooler-than-expected October US inflation reading, interest rates might need to be cut by the second half of next year.
Stewart tell IGTV's Angeline Ong that he also believes the US can achieve a ‘soft landing’ and start to see green shoots of growth in 2024.
(Video summary)
The future of interest rates
Regionally chairman, Justin Urquhart Stewart, discusses the current state of the economy and what it means for traders. The conversation with Angeline Ong starts with the recent Consumer Price Index (CPI) figure, which suggests that the Federal Reserve (Fed) may stop raising interest rates. However, Stewart believes it is too early to tell if the Fed will indeed stop raising rates.
He explains that while inflation trends are becoming clearer, raising interest rates would not be helpful as there is no excessive consumer spending that needs to be controlled. Instead, what is needed is more international political confidence in the economy's ability to grow.
Retail
The discussion then moves to the retail industry, where data shows that consumers are becoming more cautious about their spending as the holiday shopping season approaches. There are also concerns about the housing market, which may impact the likelihood of further rate hikes.
2024: a year of 'soft landing'?
Stewart suggests that a "soft landing" might happen in 2024, but warns against more rate hikes. He argues that small businesses with high levels of debt could suffer from these increases, and it is crucial to maintain the confidence of consumers. When asked about the possibility of a rate cut in the future, Aykwood-Stewart believes it is unlikely given the current behavior of the Fed. However, he speculates that a rate cut may occur later on if the economy faces more difficulties or geopolitical issues arise.
Moving on, they discuss the global level of debt and its impact. Stewart highlights the importance of positive easing and mentions that the Fed wants to gradually reduce some of the debt without disrupting the market.
Regarding investment opportunities, Stewart recommends considering American equities, particularly in companies with low or no debt. He predicts that businesses will focus on reducing debt and increasing profits, possibly through strategies like buybacks.
The interview ends with Stewart's belief that US rates may be cut towards the end of next year, depending on various factors such as the economy and geopolitics. He stresses the importance of monitoring the market areas that could benefit from these potential changes.
Overall, Stewart's insights suggest that while the economy is facing uncertainties, there are still opportunities for traders in American equities and specific sectors. It is crucial to stay informed and adapt to potential shifts in interest rates and market conditions.
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