StoneX’s Chief Market Strategist Reacts to Fed Rate Cut

Key Takeaways

• StoneX’s chief market strategist appeared on Bloomberg sharing insights on the Fed’s rate cut
• Kathryn Rooney Vera expects an additional two rate cuts in 2024
• If election outcome is contested, she sees market downturn

Kathryn Rooney Vera, Chief Market Strategist for StoneX, appeared on Bloomberg Briefs recently to offer her views on the Fed’s September half-point interest rate cut. When asked how much recalibration Fed Chairman Jerome Powell achieved with the Fed’s move, Rooney Vera said that while Powell pushed back on expectations of an aggressive cut, future cuts may not come if economic growth continues. “I think that was becoming more of a consensus view, that Powell was going to launch an additional 100 to 200 basis points in cuts in the next twelve months. And, the truth is if the economy continues to grow markedly above potential, that’s not going to happen. That’s my viewpoint.”

Rooney Vera in the discussion referenced the Atlanta Nowcast inflation expectations for the third quarter, which came in at 3.1%. “[T]hat to me doesn’t sound like a soft landing; it sounds more like a no landing,” Rooney Vera said. “[I]f the US economy continues to operate so much above potential, and we have additional industrial policy, protectionism, I think that could, as well, be inflationary, causing a real problem for the Fed,” she said. “I didn’t even mention the configuration that we’ve seen in the Middle East and the robustness of the stimuli out of China, all of which is positive for commodities and thereby positive for inflationary pressures going into 2025.”

When asked why this doesn’t make her bearish on risk, Rooney Vera suggested the risk for the S&P 500 is to the upside. “[T]he Fed is going to cut another two times probably this year, 25 basis points each, not at the 50 pace that a lot of people are expecting, rightly so. Because the Fed launched with a 50-basis point cut. But … the momentum is to the upside.”

As for the coming US presidential election, Rooney Vera sees an opportunity if the conditions are right. “This is the best electoral outcome for the markets and the leadup to an election that we’ve seen in a really long time. I think that [with] this election, if we get a division in Congress - the Senate and the House going to different powers, different hands - it really almost doesn’t matter to the market who takes the presidency,” she said, “because it limits the more extreme policy-making ideas. So…unless we do not get a clear victor on the night of November 5th [and] the markets drop…that’s a buy.”

Rooney Vera suggested defensive sectors when asked what segments looked well positioned for more favorable market trends.

In addition, Rooney Vera weighed: “gold’s done very well. I think that you want to be positioned in some amount of cash. I think utilities was my top pick this year. …[G]oing into next year… [it is]…healthcare. I’m saying protect your earnings. Protect your gains. Because while there is near-term momentum, there are inherent underpriced, and in my opinion, very large risks that need to be accounted for in portfolio positioning.”

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Watch the complete interview here.

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