By Divya Chowdhury and Bansari Mayur Kamdar
DAVOS, Switzerland (Reuters) – Guggenheim Partners’ chief investment officer forecast on Monday that the U.S. Federal Reserve would need to cut interest rates about every quarter in 2025, bringing the reduction to about 75 basis points or even a percentage point this year.
The Fed will continue its cuts, albeit more slowly 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.
Traders’ bets have shifted in recent days toward just one Fed rate cut this year, with the possibility of a second cut in play, 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 think, Walsh said, as long as the dollar remains strong as a reserve currency and the United States continues to attract capital.
Walsh expects tariffs to increase on average by less than 10% across the board and to be more country specific.
After a sharp rise through 2022, the bond market is now trading in a range for its third year, Walsh said, so the volatility there makes it interesting.
“If we get to 5% over 10 years, that’s extreme, and it’s such an oversold position, it’s a total buying opportunity,” Walsh said, adding that bond yield spreads could continue to widen. stay tight, which would also be good for US stocks.
She expects stocks to benefit more from positive global themes such as artificial intelligence (AI), energy and the reshoring of manufacturing to the United States, with the S&P 500 delivering returns of 8 to 10% by the end of 2025.
Walsh said there is some uncertainty related to Trump’s policies and what will actually be implemented by his new administration, as well as a risk that the U.S. economy could slow more than is currently expected.
“It’s like a game of ping-pong … between politics and policy, and it’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)
