Nuthawut Somsuk
As the Federal Reserve weighs the potential for additional rate cuts, Invesco's chief global market strategist is projecting two of them by the end of the year, while a KPMG senior economist is eyeing six in 2025.
Kristina Hooper and Kenneth Kim, respectively, made the predictions during the session "2024: A Global Midyear Outlook" at the Seeking Alpha Investment Summit Tuesday morning in New York.
Hooper noted that the Fed should have moved sooner in cutting rates. However, once it does, she sees small caps and cyclicals especially as beneficiaries.
While Kim sees one rate cut this year, that will grow to six next year, he anticipates. He added that there are several factors that will likely move the Fed to cut the rate in December, including this morning's retail sales report from May.
Treasury yields (US10Y) (US2Y) (US30Y) (TBT) (TLT) (SHY) (IEF) (IEI) are down in the wake of that report, but off their lows.
Other data that will guide the Fed's decision include the personal expenditures report late this month, unemployment data, and industrial activity.
"The ISM manufacturing index went below 50" recently," he said. "This means that manufacturing executives believe activity is contracting," a softer signal for the economy.
Principal Asset Management President and CEO Kamal Bhatia noted that when he talks to global investors, "while their faith in the U.S. is very, very strong … the biggest concern I get from investors is the unsustainable level of debt the U.S. has."
He added that while international investors represent a significant influx of money into U.S. investments, he is concerned there may come a point where these investors will not accept these debt levels.