Will the Fed not cut interest rates by the end of the year, and will US stocks plummet 10% next fiscal year?

According to analysts at Stifel, an independent US investment bank and financial services company, the US stock market will sell drastically over the next few months, and the Standard & Poor's 500 Index will fall 10%.

According to CME's FedWatch tool, the market currently predicts that the Fed will cut interest rates twice in September and December this year. However, since there is a high possibility that the US economy will fall into “moderate stagflation,” Stifel predicts that it is unlikely that the Fed will implement monetary easing in 2024.

It's a tough situation for US stocks, where low growth and high inflation are making investor returns lukewarm. US GDP has already cooled down since last year, and the economic growth rate in the first quarter was only 1.3%. Meanwhile, inflation levels exceeded expectations in the first three months of the year.

Stifel's strategist added that high prices are limiting the Fed's interest rate cuts in 2024, and this year's rate cuts cannot be expected at all.

“The emergence of a no-landing scenario and higher-than-expected inflation have limited the Fed's movement (to cut interest rates). they write.

“The S&P 500 stock price index is expected to fall by about 10% from its most recent peak and to be around 4,750 at the end of the third quarter of 2024. ”

“Trends over 100 years have shown that it is necessary for the S&P 500 stock price index after adjustment for inflation to stably update high prices in order to enter a “long bull market.” If the inflation-adjusted S&P 500 leaves this trend, it will historically enter a “long bear market.” ” they explain.

Other market commentators have warned that the future of the stock market is bleak, even though the S&P 500 hit a record high this year. Some veteran investors say that the stock market looks expensive when viewed from several indicators, and that a sharp fall in US stocks is imminent.