DWS: Expects the Fed to start cutting interest rates in December, US stocks will adjust before the US election

Zhitong
2024.07.17 09:04
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DWS Global Chief Investment Officer Björn Jesch expects the Federal Reserve to start cutting interest rates in December this year, with a very gradual rate cut path. The European Central Bank and the Bank of England are also expected to cut interest rates. Despite the overvaluation of US stocks, as long as the "Big Seven" in the US stock market continue to deliver good earnings and research results, stock prices are expected to continue to rise. DWS has raised its stock price target based on higher earnings per share assumptions and expects a correction before the US presidential election. Artificial intelligence investments will continue to drive GDP and corporate earnings growth. DWS remains cautious on Chinese stocks but is optimistic about the gradual recovery of the Indian economy

According to the financial news app Smart Finance, Björn Jesch, Chief Investment Officer of DWS Global, predicts that the Federal Reserve will cut interest rates three times by June 2025. However, the first rate cut is expected to begin in December of this year, and the rate cut path will remain very gradual. As for the European Central Bank, with improving inflation prospects, the bank expects to gradually cut interest rates three times per quarter before March 2025. The Bank of England is expected to make its first rate cut in August of this year and accumulate four rate cuts by June 2025.

In addition, Björn Jesch believes that despite the high valuation of US stocks, as long as the "Big Seven" of the US stock market continue to deliver good earnings and maintain impressive new research and development results, stock prices are expected to continue to rise, and the bank has not seen any signs of a downturn so far. DWS has raised its stock price target based on higher earnings per share assumptions, as investors are increasingly focusing on the fiscal policies of the next president, as well as the development trends of US debt and bond yields.

DWS expects an adjustment before the US presidential election. Although the extent to which artificial intelligence (AI) will ultimately bring productivity gains remains to be seen, the billions of dollars currently invested in AI and related investments are not a flash in the pan, and will continue to drive GDP and corporate earnings growth. The bank has set a target of 5600 points for the S&P 500 index in June 2025 and maintains an estimated price-to-earnings ratio (P/E) of 21.5 times based on the earnings level of the past 12 months.

Regarding emerging markets, DWS remains cautious on Chinese stocks. Despite the considerable earnings recently announced by tech companies. On the other hand, with the support of local buyers, the Indian economy is gradually recovering. By June 2025, the target price for the MSCI Emerging Markets Index is 1110 points

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