By Divya Chowdhury and Bansari Mayur Kamdar
DAVOS, Switzerland (Reuters) – Guggenheim Partners’ chief investment officer predicted on Monday that the U.S. Federal Reserve will likely cut interest rates quarterly through 2025, bringing the cut this year to about 75 basis points or even a full percentage point.
The Fed will continue to cut spending, albeit on a slower path than expected, Guggenheim CIO Anne Walsh told the Reuters Global Markets Forum at the start of the World Economic Forum’s annual meeting in Davos.
Trader bets have moved in recent days to just one Fed rate cut this year, with the chance of a second cut hanging in the balance, up from at least three a month ago.
The tariffs expected to be imposed by new President Donald Trump likely won’t be as punitive as most expect, Walsh said, as long as the dollar remains strong as a reserve currency and the U.S. continues to attract capital.
Walsh expects rates will increase by less than 10% on average across the board and will be more country-specific.
After a sharp bull run through 2022, the bond market is now trading within a range for the third year, Walsh said, with the volatility here making it interesting.
“If we get to 5% over 10 years, that’s extreme, and that’s such an oversold position, that’s a total buying opportunity,” Walsh said, adding that bond yield spreads could remain tight, which is also good will be for the economy. US stocks.
She expected stocks to further benefit from positive global themes such as artificial intelligence (AI), energy and a relocation of manufacturing to the US, with the S&P 500 returning 8% to 10% by the end of 2025.
Walsh said there is some uncertainty surrounding Trump’s policies and what will actually be implemented by his new administration, and there is also a risk that the U.S. economy slows more than currently forecast.
“It’s like a ping-pong game between politics and policy, and that’s going to create a lot of volatility around our (investment) themes this year,” Walsh said.
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(Reporting by Divya Chowdhury in Davos and Bansari Mayur Kamdar; Editing by Alexander Smith)