Wells Fargo Analysts Predict More Rate Cuts by Federal Reserve to Boost Market Opportunities in 2025
In a recent note to clients, Wells Fargo analysts have suggested that the Federal Reserve's recent rate cut is just the beginning of a series of reductions that could lead to broader market opportunities in 2025. Despite the surprise of last week's 50 basis point cut, the focus should be on the longer-term trajectory of rates rather than the size of the cut.
The Fed's decision to cut rates has been supported by the fed funds futures market, which had already priced in a 58% probability of such a move. Wells Fargo anticipates that these rate reductions will provide crucial support to economic growth and labor markets. Federal Reserve Bank of Chicago President Austan Goolsbee has also indicated that more rate cuts may be necessary to support the economy.
Wells Fargo predicts that there will be a total of 100 basis points of cuts in 2024, with 25 bps cuts expected at both remaining FOMC meetings this year. While the timing of rate cuts in 2025 remains uncertain, Wells Fargo does not foresee a recession but expects a moderate economic slowdown before the positive impacts of rate cuts begin to take effect.
By the first and second quarters of 2025, Wells Fargo expects the domestic economy to respond to the easing cycle, which will also benefit earnings, especially as a significant portion of revenues in the index come from international markets. Overall, Wells Fargo believes that the recent Fed rate cut is just the beginning of a series of reductions that will open up broader opportunities next year.
Analysis:
- Federal Reserve's rate cuts are expected to boost market opportunities in 2025.
- Wells Fargo anticipates a total of 100 basis points of cuts in 2024.
- The timing of rate cuts in 2025 remains uncertain, but a moderate economic slowdown is expected before positive impacts are felt.
- The domestic economy is predicted to respond positively to the easing cycle by the first and second quarters of 2025.
- The recent rate cut is seen as the start of a series of reductions that will create broader opportunities in the market.
