Source: Finance Association
① Eisman warned that if the Federal Reserve continues to cut interest rates this year, the US stock market will create a bubble; ② He pointed out that falling unemployment, rising wages, and strong consumer spending are all reasons not to cut interest rates; ③ This well-known investor believes that the last internet bubble was killed by the Federal Reserve's countermeasures, not the bubble itself.
Big bear Steve Eisman (Steve Eisman) said on Tuesday that if the Federal Reserve cuts interest rates this year, a bubble in the US stock market will form. He believes that the Federal Reserve should stay on hold this year and keep today's high interest rates unchanged. His reason is that the US economy is running well now.
“My opinion is that the economy is doing well. “I personally don't think the Fed should cut interest rates this year,” he said on a program. “What I'm really worried about is that if the Fed actually cuts interest rates, I think the market will become full of bubbles, and then we will run into real problems. So the Federal Reserve should do nothing and wait for the data to weaken.”
Eisman is the prototype for the movie “The Big Short”. As a senior portfolio manager at Neuberger Berman Group (Neuberger Berman), he is famous for shorting subprime mortgages before the global financial crisis broke out.
Despite the “bubble theory” still circulating in the market, strong profit growth in large technology stocks has already boosted Wall Street veterans' target price for the 2024 S&P 500 index. However, expectations of interest rate cuts weakened after personal consumption expenditure (PCE) and ISM manufacturing data showed the latest signs of inflation.
Despite this, Federal Reserve Chairman Powell reiterated his plan to cut interest rates three times this year at the FOMC meeting in March, but Eisman opposed this dovish stance.
He believes that all the data reminds people not to rush to expect the Federal Reserve to cut interest rates, and added that the unemployment rate is falling and wages are rising; the only thing worth complaining about is high inflation.
“There is still a shortage of jobs, so consumers are good. So why are you undermining it by lowering interest rates?” he said.
In fact, it's not just Eisman who thinks so. San Francisco Federal Reserve Chairman Mary Daly (Mary Daly) also said on the same day that “cutting interest rates three times during the year,” which officials reiterated last month, is a reasonable expectation, but there is currently no rush to reduce borrowing costs.
“I think this is a very reasonable basic expectation. However, given that the economic growth momentum of the US is still strong, there is really no urgency to adjust the central bank's interest rate; staying on hold is the correct policy at present.” she said.
Finally, Eisman also emphasized that there is nothing worse than the Federal Reserve cutting interest rates first and then raising interest rates when necessary; the lessons of history have proven this.
“One thing I always think about is that in 1999 and 2000, the market must have been in a bubble. However, it was not the bubble itself that killed the bubble, but the Federal Reserve raised interest rates sharply, causing the economy to fall into recession.” he said.
editor/tolk