Morgan Stanley: Federal Reserve focuses on labor market, will continue to cut interest rates in November
Morgan Stanley Wealth Management's Chief Investment Officer Lisa Shalett stated that the Federal Reserve will continue to cut interest rates in November, but policymakers are cautious due to slowing inflation. She pointed out that the labor market conditions vary, and the Fed has abandoned the pursuit of a 2% inflation target. The market expects an 89% probability of a 25 basis point rate cut. Shalett recommends clients to invest in physical assets to cope with market volatility and favors market-neutral hedge fund strategies
According to the Zhitong Finance APP, Lisa Shalett, Chief Investment Officer of Morgan Stanley Wealth Management, stated that the Federal Reserve will continue to cut interest rates in November, but policymakers are proceeding cautiously as inflation no longer accelerates cooling.
Lisa Shalett mentioned that the Federal Reserve is focusing on the labor market, with evidence showing that the labor market is "mixed in terms of good and bad conditions."
"They will not pursue the 2% (inflation) target; they have given up," she said.
Last week, most Federal Reserve policymakers gave the green light to further rate cuts in the coming months, while Atlanta Fed President Bostic stated that it might be reasonable not to cut rates in November.
Shalett said, "The stock market has not yet realized this, but as higher inflation expectations are digested, the bond market seems to be showing signs of a rebound from a long-term perspective."
Data released last week showed that the U.S. Consumer Price Index (CPI) in September slightly exceeded expectations, while the Producer Price Index (PPI) remained flat.
Traders currently believe that there is an 89% chance of a 25 basis point rate cut at the Federal Reserve's policy meeting on November 6th to 7th, abandoning the expectation of a 50 basis point cut after the September jobs report and other optimistic economic data were released.
Meanwhile, Shalett stated that with both parties evenly matched, she does not expect a clear result on the day of the U.S. presidential election on November 5th.
Polls last week showed that Democratic Vice President Harris and former Republican President Trump are neck and neck in seven battleground states.
Shalett said, "We encourage clients to anchor positions in what we call real assets... including gold, commodities, real estate, energy infrastructure assets," to "avoid" the escalating market volatility.
"We also favor market-neutral hedge fund strategies," she added