Source: Finance Association
① Blitz answered that the inflation situation is improving. Powell said there has been no substantial change in his outlook for inflation to continue to fall; ② The Federal Reserve is following the trend; they are doing the right thing and are not hurrying in any direction.
There is another trading day coming to an end in the first quarter. During this period, the S&P 500 index has risen 10%, which is expected to be the best opening performance for the first quarter since 2019. However, US stock gains have recently come to a standstill due to repeated hawkish signals from Federal Reserve officials.
Steven Blitz, the chief American economist at investment research firm TS Lombard, is very optimistic. He believes that investors need not worry about this; even if the Federal Reserve does not cut interest rates this year, US stocks will continue to rise.
At the time of his remarks, investors are waiting for the US to release more economic data and are closely watching the Federal Reserve officials for clues about how many times interest rates will be cut in 2024.
On Thursday, when asked about the Federal Reserve's policy direction this year, Blitz answered that the inflation situation is improving, and Powell said there has been no substantial change in his outlook for inflation to continue to decline. “In fact, the Federal Reserve has told us they won't raise interest rates any more. Investors will then slowly adapt to the current situation, and the market will continue to rise.”
Blitz said that even if the Federal Reserve decides not to cut interest rates this year, the market may continue to rise. American asset management company Vanguard calls this outlook a basic hypothesis, which establishes a set of reasonable assumptions based on historical data, current trends, industry knowledge, and other relevant information.
Blitz claims that the US is a very large and diverse economy, and it is also a very large country. There will always be leaders and laggards in all walks of life, and the job of investors is to select stocks that perform better.
At the beginning of this year, investors expected the Federal Reserve to cut the benchmark short-term interest rate six times in 2024. This expectation has proven to be overly optimistic.
The day before, Federal Reserve Governor Waller said that there is no need to rush to cut interest rates. He stressed that recent US economic data shows that interest rate cuts should be postponed or the number of interest rate cuts this year should be reduced.
Waller called recent US inflation figures “disappointing” and said he hoped to see at least a few months of better inflation data before cutting interest rates. Waller pointed out that in addition to the inflation problem, the strong US economy and labor market are also reasons why the Federal Reserve can wait longer. The Fed has room to wait to be convinced that inflation will continue to move towards the 2% target.
Additionally, Atlanta Federal Reserve Chairman Bostic reiterated that he expects the Fed to cut interest rates only once this year, adding that as long as the economy remains strong, policymakers can be patient.
Blitz commented that Waller's statement is very important. To some extent, he is regarded as the “personification” of Federal Reserve Chairman Powell, so when he says something, the market should respond in a certain way.
He added: “Actually, the Federal Reserve is moving with the trend; they are doing the right thing and are not rushing in either direction.”
Blitz pointed out that if there is a problem with the US economy after June, the Federal Reserve will cut interest rates, but the prospects for cutting interest rates in the second half of the year may be “very difficult.” If the Fed actually cuts interest rates, it's because the inflation rate continues to slow, and they don't want to passively adopt more restrictions.”
editor/tolk