Richard Harris, Executive Director of Port Shelter Investment Management, predicts a rate cut is almost certain during the Federal Open Market Committee (FOMC) meeting scheduled for December 17-18. According to Harris, the market has already priced in the expected rate cut, making it all but a certainty.
Looking ahead, Harris highlights the uncertainty surrounding Jerome Powell future at the Federal Reserve, noting that Powell position may be influenced by political pressure. “The big question is whether Jerome Powell will remain in his position, as it evident that he generally opposes Trump’s stance,” Harris stated.
Harris also suggests that US politicians may push for lower rates, with the key challenge being how much the Federal Reserve will resist political pressure. “It is likely to be quite a battle,” he said, emphasizing the complexity of the situation.
Trump’s Economic Policies and Their Impact on Interest Rates
Harris believes that President-elect Donald Trump economic policies will likely be inflationary, which may not be beneficial for the US economy. This could lead to further rate cuts as the economy slows. Despite concerns about Trump policies, Harris remains optimistic about global market performance, particularly for India.
“The markets had a fantastic run this year, so periodic breathers are inevitable,” he said. Despite potential market pullbacks, Harris remains confident in a reasonably buoyant global market outlook for the time being.
Challenges Ahead in Early 2025
The first few weeks of 2025 could be a challenging period for both Indian and global markets, according to Harris. “The early weeks of the year will be a delicate period, where investors reassess their outlook for 2025,” he remarked, signaling that market sentiment may undergo significant shifts in the new year.
US Tax Cuts and Their Potential Risks
Harris also expressed skepticism about President-elect Trump’s proposed tax cuts, calling them “dangerous” for the US market. He questioned the feasibility of such cuts given the pressure from bond vigilantes, warning that while tax cuts may seem appealing, they could create long-term risks for investors.
Despite his concerns, Harris remains optimistic about the overall market performance in 2024, except for China, which has struggled to keep pace with global trends. Investors will need to carefully monitor developments in the early months of 2025 to navigate potential risks and opportunities in the evolving global economic landscape.
