While there are potential downside risks, particularly from political and geopolitical factors, these concerns were also present in 2024, which is expected to conclude as a strong year for both the economy and equity markets.
The continued strength of the labor market is likely to bolster consumption and growth in 2025, while falling interest rates may provide the Fed with the opportunity to implement further cuts.
Markets have currently priced in only two 0.25% rate cuts for 2025, but any additional cuts could negatively impact the dollar and bond yields while supporting equity prices, bond prices, and industrial commodity prices.
In summary, despite the FOMC’s projections, Prestige Economics anticipates at least three rate cuts in 2025, with the next cut expected by or before the May 2025 Fed meeting.
