Guggenheim CIO Forecasts Multiple US Fed Rate Cuts in 2025
Guggenheim Partners' Chief Investment Officer, Anne Walsh, predicts the US Federal Reserve (Fed) will gradually reduce interest rates throughout 2025, potentially lowering them by 75 basis points or a full percentage point this year.
Despite previous expectations of a more aggressive rate-cutting path, Walsh believes the Fed will proceed with a measured approach. She attributes this shift to the continued strength of the US dollar as a reserve currency and the country's ability to attract capital.
Walsh expects tariffs imposed by President Donald Trump to be less severe than anticipated, particularly as long as the dollar remains strong. She predicts average tariff increases of less than 10% across the board.
Regarding the bond market, Walsh notes it has entered a trading range for the third consecutive year. Despite its volatility, she identifies buying opportunities at a 10-year yield of 5%. She also anticipates tight bond yield spreads, which will benefit US equities.
Walsh anticipates stock market gains driven by positive global trends, such as artificial intelligence (AI), energy, and the return of manufacturing to the US. She projects a return of 8%-10% for the S&P 500 by the end of 2025.
However, she acknowledges uncertainties surrounding Trump's policies and the potential for a slower-than-projected US economic slowdown. "It's like a game of ping pong between politics and policy, and that's going to create a lot of volatility around our investing themes this year," Walsh said.