The footsteps of the first interest rate cut are getting closer and closer, and the strategists are exhausted. The market is still "endlessly talking", and the big shots are starting to raise their microphones and have different opinions. Wall Street is really "noisy".
Before, the new bond king "speaks out" to support a 50 basis point interest rate cut, and the Federal Reserve is already "lagging behind the curve"; after, Bridgewater Associates' founder Ray Dalio made a statement that a 25 basis point interest rate cut is the right move, while JPMorgan Chase CEO Jamie Dimon holds a "indifferent" attitude: "These are all minor issues."
New Bond King: Support a 50 basis point interest rate cut
The new bond king Gundlach made a "radical" bet that the Federal Reserve may cut the benchmark interest rate by 50 basis points on Wednesday, with a total reduction of 125 basis points by the end of the year.
Although many people in the market believe that such an aggressive easing cycle will trigger panic about the impending recession in the United States, Gundlach pointed out that the Federal Reserve is already seriously "lagging behind the curve" because "the US economy has already entered a recession, and the Fed has maintained policy tightening for too long." Gundlach pointed out:
"This is a clash of fire and brimstone."
However, some analysts believe that the current stock market has not yet reflected signs of a recession. Once people realize how bad the situation is, the stock market will immediately collapse, causing trillions of dollars in market capitalization to evaporate and making the recession even more severe. And this is exactly why it is unlikely that the Federal Reserve will cut interest rates by 50 basis points in haste.
Bridgewater Associates' Ray Dalio: 25 basis points is the right move
Bridgewater's founder Dalio's view is also different from that of Gundlach. He believes that, from the perspective of the overall economic situation in the United States, the Federal Reserve may cut interest rates slightly this week. On Wednesday, Dalio said in an interview:
"The Federal Reserve needs to keep interest rates at a sufficiently high level to meet the needs of creditors for real returns, while also avoiding excessive interest rates that would put pressure on debtors. If we look at it as a whole, a 25 basis point cut is the right approach."
During the 2024 Asian Summit of the Milken Institute, Dalio also stated:
"If we look at the mortgage market, the situation is worse and the impact is greater, so the reduction in interest rates could be 50 basis points."
However, he also pointed out that regardless of the Federal Reserve's final decision on the amount of interest rate cuts, there is "no difference" in the long run. Dalio emphasized that policymakers need to keep real interest rates low so that people can repay the increasing debt.
It is worth noting that data shows that the cumulative interest on U.S. debt in the 2024 fiscal year within 11 months has exceeded $1 trillion, reaching a historical high, and is expected to reach $1.2 trillion for the full year.
JPMorgan Damon: It doesn't matter.
JPMorgan's CEO Dimon, the financial giant, holds a "nonchalant" attitude towards the Fed's policy decisions, believing that whether the Fed chooses to cut interest rates by 25 basis points or 50 basis points, this move "will not be earth-shattering."
Damon said on Tuesday that they need to do this, but the Fed's interest rate hikes and cuts are small matters because the economic fundamentals are more important.
Previously, Damon and Gallak stood in opposing camps. For more than a year, he has been warning that inflation may be more stubborn than expected by investors. In his annual shareholder letter in April, he wrote that his company is prepared for interest rates of 2% to 8% or higher.
He also pointed out that people are overly concerned about whether the Fed will have a "soft landing" or a "hard landing".
"To be honest, most of us have experienced these things, so they are not important."
Editor/ping