Market veteran Ed Yardeni stated that the US stock market may currently be hitting a "ceiling".

The long-term investor and president of Yardeni Research Company mentioned that due to the strong US economy and concerns about the outlook of federal debt balance, he believes that the space for the Fed to lower interest rates is limited.

In a recent report to clients, he indicated that this means further policy easing may not occur until 2025, and the S&P 500 index may stay around 5800 points until the end of this year. This implies that the benchmark index will grow by less than 1% in the next two months.

Yardeni mentioned that since the significant rate cut by the Fed in September, the US stock market has been in a "holding pattern". Since the last policy meeting, the S&P 500 index has risen by 2%, while the S&P 500 Equal Weight Index has increased by 3.8%.

Yardeni wrote, "We expect the market to possibly continue this way for the rest of the year, hovering around 5800 points. Post-election, the outlook for fiscal policy may continue to be unsettling, and the Fed may not lower the federal funds rate at all for the remainder of the year."

Yardeni highlighted the recent strong economic data, indicating that there may not be further rate cuts at the Fed's meetings this week or in December.

In the third quarter, the actual GDP growth of the USA was strong, increasing by 2.8% year-on-year. Business equipment investment grew by 11% in the third quarter, compared to nearly 10% growth in the previous quarter. According to data from the US Bureau of Economic Analysis, investment in information processing equipment especially reached a historical high.

The soft labor market has made some investors worried, with the US adding far fewer jobs in October than expected. However, analysts say that the labor market weakness is at least partially due to events such as union strikes and hurricanes Helen and Milton. Importantly, the unemployment rate last month remained close to a historic low of 4.1%.

Yadni added, "The bond market agrees with our view that the Fed cut rates too early and by too much." He pointed out the recent rise in US bond yields, indicating that bond investors have higher expectations for interest rates.

Meanwhile, government borrowing may increase in the coming months, economists say. This factor could indirectly raise inflation, thereby limiting the Fed's ability to cut rates.

Yadni said, "What can we expect when the debt ceiling suspension ends on January 2nd next year? A divided government may force the Treasury to take unconventional measures (like last year) to fund the government, while Congress debates the increasing debt ceiling. The bond market may need a debt crisis to restrain Washington's fiscal deficit."

Yadni had previously warned clients that the Fed may not cut rates in 2024. However, according to the CME Group's FedWatch Tool, most investors expect the Fed to cut rates by 25 basis points this week and by the same amount in December.

Some forecasters even believe that the Fed may make another significant rate cut this year because the labor market may be weaker than it appears on the surface.