[ad_1]
The stock market is getting ahead of itself by betting on aggressive rate cuts by the Federal Reserve this year, according to “The Big Short” investor Steve Eisman. The Neuberger Berman senior portfolio manager said Tuesday on CNBC’s ” Fast Money ” that the Fed will be looking to history under Paul Volcker and therefore reluctant to cut rates. “I think the Fed is still petrified of making the mistake that Volcker made in the early 80s, where he stopped cutting rates and inflation got of control again,” Eisman said. The Fed’s latest economic projections showed central bankers were penciling in three rate cuts for 2024, assuming each cut is equal to 0.25 percentage point. The options market implies that traders are pricing in double that amount, according to the CME FedWatch Tool . Eisman, on the other hand, said his best guess is that the Fed will cut rates just once in 2024. “If there’s no recession, I don’t see any reason why the Fed needs to be aggressive in cutting rates. What for?” Eisman said. Volcker served as chair of the Federal Reserve from 1979 to 1987. Under his leadership, the Fed briefly cut rates in 1980 before quickly reversing course, which some economists see as a key factor in causing a “double dip” recession in the United States. Eisman also said he was concerned that “everybody is coming into the year feeling too good ” about stocks and the economy. The uncertainty around interest rates and the path of the economy is a key reason why Eisman is avoiding bank stocks even though the group underperformed the broader market in 2023, he said. Eisman came to fame as one of the investors who correctly bet against the U.S. housing market before the 2008 financial crisis while at FrontPoint Partners. His trade was chronicled in the book “The Big Short” by Michael Lewis and the film of the same name, with Steve Carell playing a character based on Eisman.
[ad_2]
Source link