A Fed rate cut shouldn’t be seen as a cure-all for ailing global growth - Morgan Stanley


Lisa Shalett, Chief Investment Officer at Wealth Management, still sees the S&P 500 remaining rangebound throughout this year, even with a rate cut from the Federal Reserve.

Key Quotes: 

“Powell’s Fed did a policy pivot early this year, putting its rate hike plans on pause. Now, as the U.S. economy has continued to weaken, Fed officials have indicated that they are open to cutting rates if necessary. Investors, in turn, are now expecting rate cuts as early as this summer, and that has sparked a rally in stocks.”

“I’m not convinced the ebullience will last. While cutting rates should help stimulate flagging economic growth, it wouldn’t affect some issues that have the potential to spark investor fear and volatility. Below are three current market risks that cutting rates won’t address: 

  1. Trade conflicts aren’t going away.
  2. There is potential for a hard Brexit. 
  3. Antitrust issues loom for tech giants. 

I suggest that investors stay cautious. This could be a good time to create watch lists of companies in sectors like financials, energy, materials and select health-care and industrials that could be good buys if selling pressure resumes.”
 

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