Stocks May Not Need A Fed Rate Cut—But Bonds Could Be In Trouble, Says Sage Advisory
The Federal Reserve held interest rates steady at 4.25%-4.50% during Wednesday’s June meeting, with Chair Jerome Powell signaling no urgency to cut rates as officials monitor potential tariff-driven inflation impacts.
What Happened: Sage Advisory managing partner Thomas Urano told Yahoo Finance that while equity markets may not require rate cuts, the bond market could benefit from easing to move higher.
“I don't think the market needs a rate cut. The bond market might need one to move higher from here, but I'm not convinced the equity market does,” Urano said.
Powell acknowledged “encouraging” inflation data but raised the Fed’s median core inflation forecast to 3.1% from 2.8% in March, attributing the increase to expected tariff effects.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ) declined slightly following the announcement.
Why It Matters: Urano noted the Fed expects economic growth to rebound in the second quarter before settling into a “slightly below average growth rate” in the mid-1.4% to 1.5% range for 2025. This modest growth outlook may not support rising equity multiples but could position the bond market for potential Fed easing in 2026.
The 10-year Treasury yield currently trades at 4.37%. Urano expects the benchmark to remain between 4% and 4.5% for an extended period, while anticipating the two-year note around 4% could rally if the Fed shifts policy lower toward its projected 3.25%-3.50% target range.
Economist Peter Schiff warned of a “worse financial crisis than 2008,” while Mohamed El-Erian highlighted policy and geopolitical uncertainties clouding the Fed’s path forward.
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Posted-In: Jerome PowellNews Economics Federal Reserve Markets
