UBS expects the Fed to cut the interest rate next month and the SP500 index to reach 5900 levels by the end of the year and 6200 levels by the middle of next year.
The reasons from their point of view, in short, were as follows:
- Fed officials are confident that a rate cut is very appropriate very soon
- Federal Reserve Chairman Jerome Powell is expected on Friday in Jackson Hole to give guidance on the Fed's upcoming decision as it moves away from its restrictive policies. September data to be released before the decision would provide more clarity.
- The Fed is expected to cut interest rates in advance, possibly easing rates at each of its three remaining meetings in 2024, with the possibility of reducing them by 50 basis points if the labor market or consumer spending weakens significantly, but then there will be fears of a recession and the economy will not fall smoothly.
