To maintain a strong dollar, the Federal Reserve needs to pause interest rate cuts!

Ed Yardeni, president of Yardeni Research, stated that to maintain the strength of the dollar, the Federal Reserve may need to stop cutting interest rates. Yardeni pointed out that the U.S. economy is performing robustly, and his company, Yardeni Research, has maintained a positive outlook on the dollar.

He mentioned that a few months ago, the dollar weakened due to market expectations of multiple interest rate cuts by the Federal Reserve, and Yardeni believed this would be a mistake. He added that the performance of the U.S. Treasury market and the dollar supports this view. He believes that by stopping or reducing interest rate cuts, the Federal Reserve will help maintain the strength of the dollar.

Yardeni explained that a stronger dollar typically leads to weaker foreign currencies, including the yen and the euro. He noted that when tariffs (such as those imposed by former President Trump during his first term) suppress global economic activity, they may depress commodity prices, thereby weakening the currencies of commodity-exporting countries like Canada, Australia, Brazil, and Indonesia.

Meanwhile, Yardeni described the economic outlook for Europe as quite disappointing and pointed out that Japan has been hesitant to raise interest rates. As the Federal Reserve may slow down the pace of interest rate cuts, Yardeni expects the dollar to continue to rise.

Regarding emerging markets, Yardeni stated that Trump's return to the presidency would create a different global environment compared to the Biden administration or Trump's first term.

Yardeni speculated that Trump might impose a 10% tariff on all imported goods, with tariffs on Chinese goods potentially reaching 60%, which could slow global economic growth. He noted that while U.S. consumers would bear these higher costs, the increased tariffs could reduce demand for overseas imports, indirectly affecting international trade and economies reliant on exports to the U.S.

On Monday, the veteran strategist reiterated his prediction that the S&P 500 index will reach 10,000 points by the end of the 2020s (2030), representing a 66% increase from current levels. He also raised his year-end forecast for 2024 to 6,100 points, indicating an additional 1.8% upside potential.

He added that if the conflicts in Ukraine and the Middle East are resolved sooner than initially expected, market optimism could further intensify.

However, Yardeni also warned that if the stock market cannot rise quickly due to excessive gains, the optimism on Wall Street and the overvaluation of some large stocks could lay the groundwork for a market decline