Greatest Bull Market in 30 Years? Expert Believes Fed's Rate Cuts Could Be the Catalyst
Now, stock traders are closely watching the Federal Reserve's next move. With the cooling of inflation, it seems that a rate cut in September is a foregone conclusion. Although rate cuts by the Federal Reserve are not always beneficial to the stock market. But given the current economic situation in the United States, once the Federal Reserve triggers the rate cut button, the U.S. may be about to usher in a big bull market.
Paul Christopher, head of global investment strategy at Wells Fargo, said in an interview with the media on Thursday that the U.S. stock market is about to see the greatest bull market in 30 years.
He pointed out that today's market is similar to the market in 1995 when the stock market was booming and the S&P 500 index set 77 historical highs.
Christopher said that investors may currently be facing an environment similar to that of 1995 - inflation is declining, and the economy is not collapsing.
Christopher also said that the Federal Reserve is in a good position here if they can be proactive enough. He suggested that the Federal Reserve will cut rates by 50 basis points in September and then cut rates a couple more times before the end of the year.
We've still got a good chance to soft-land this economy, he added.
The Federal Reserve began raising interest rates in March 2022 to combat inflation. After a series of rate hikes by the Federal Reserve, the current inflation rate is much lower than the peak in the summer of 2022. Data released by the U.S. official on Wednesday showed that the Consumer Price Index (CPI) in July rose by 2.9% year-on-year, falling for the fourth consecutive month, and returned to the 2s for the first time since March 2021.
At the same time, the thing people worry about most - the possibility of the Federal Reserve's continuous rate hikes triggering an economic recession - has not happened. According to the preliminary value of GDP released by the U.S. Department of Commerce for the second quarter, the U.S. economy grew by 2.8% in the last quarter, which is not only far higher than the first quarter's 1.4% but also higher than the expected 2.1% by economists.
Looking back at the situation in the summer of 1995, under the leadership of the Federal Reserve Chairman Greenspan, the Federal Reserve also launched a series of rate cuts. The rate cut cycle at that time coincided with the slowdown of inflation in the United States and was accompanied by a soft landing of the economy.
According to relevant statistics, one month after Greenspan began to cut interest rates on July 6, 1995, the U.S. stock market S&P 500 index rose by 2.3%; the increase reached 7.2% after three months; the increase reached 14.1% after six months; the increase expanded to 23% after 12 months; and the increase reached an astonishing 41.4% after 18 months. The above increase in data starts from the closing on July 5, 1995.
Christopher expects more fluctuations in the stock market in the coming months and points out that geopolitical tensions and the presidential election bring uncertainty. He believes that if the Federal Reserve appropriately relaxes policy, investors may benefit a lot after this period.
He said that the decline in short-term interest rates is most likely to benefit financial and technology stocks, as financial institutions will gain more from deposits, and the profits of technology companies will be improved, and these two trends are exactly what happened in 1995.
It is worth noting that the U.S. stock market is currently in a long bull market. In the past year, the S&P 500 index has risen by nearly 26%, and the increase in the past 5 years has nearly doubled.