By Divya Chowdhury and Bansari Mayur Kamdar
DAVOS, Switzerland (Reuters) – Guggenheim Partners' chief investment officer predicted on Monday that the U.S. Federal Reserve is likely to cut interest rates roughly every quarter in 2025, bringing the cut to about 75 basis points or up to aged a full percentage point this year.
The Fed will continue to cut, albeit on a slower-than-expected path, 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 the past few days on just one Fed rate cut this year with the chance of a second cut hanging in the balance, down from at least three months ago.
The tariffs expected to be imposed by incoming President Donald Trump probably won't be as punitive as most expect, Walsh said, as long as the dollar remains strong as the currency at back and that the United States continues to attract capital.
Walsh expects tariffs, on average, to rise by less than 10% across the board, and to be more country-specific.
After a sudden bull run until 2022, the bond market is now trading in a range for its third year, Walsh said, with the volatility within this making it interesting.
“If we get to 5% on the 10-year, that's extreme, and that's an oversold situation, it's an absolute buying opportunity,” Walsh said, adding that bond yield spreads could continue to remain tight, which will also be good for US equities.
She expected stocks to benefit further from positive global themes playing out such as artificial intelligence (AI), energy and manufacturing restructuring for the US, with the S&P 500 delivering gains of 8%-10 % by the end of 2025.
Walsh said there is some uncertainty surrounding Trump's policies and what is actually being implemented by his incoming administration, as well as a risk that the US economy will slow down more than expected. currently anticipated.
“It's like a game of ping pong … 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)