Nomura Global Macro Research Head Su Bowan: The Federal Reserve will only cut interest rates once in 2025, and there is even a possibility of raising interest rates?

Recently, Wall Street Insight was invited to communicate with Su Bowen, the Global Head of Macro Research and Co-Head of Global Market Research at Nomura.

Su Bowen stated to Wall Street Insight: Nomura's baseline forecast is that the Federal Reserve will only cut interest rates once in March 2025, but there is also a risk of not cutting rates at all throughout the year, and artificial intelligence may be the biggest support for the market.

The Federal Reserve May Only Cut Rates Once in 2025, and Even a Rate Hike is Possible

On December 19, 2024, the Federal Reserve announced its last interest rate decision of the year, lowering the target range for the federal funds rate by 25 basis points, marking the third consecutive rate cut, in line with market expectations. However, subsequent hawkish statements from the Federal Reserve triggered a significant drop in the U.S. stock market, clearly dampening market trading sentiment.

Before the December meeting, FOMC members believed there would be four rate cuts in 2025, each by 25 basis points. However, the latest dot plot shows that FOMC members now believe there will only be two rate cuts, and the reduction in the number of cuts was unexpected by the market.

Su Bowen stated, "Nomura's baseline forecast is that the Federal Reserve will only cut rates once in March 2025, but there is also a risk of not cutting rates at all throughout the year, and even the possibility of a rate hike cannot be ruled out. If the Federal Reserve pauses rate cuts, some hawkish expectations in the market may rise, believing that the Federal Reserve may raise rates."

Currently, the direction of the Federal Reserve's monetary policy mainly depends on the performance of economic data, which will influence the Federal Reserve's decision-making judgment.

In addition, Trump's return to power will also bring considerable uncertainty to the market, with the biggest risk being: once Trump's tariff policy is officially implemented, its aggressive tariff measures may lead to a resurgence of inflation in the U.S., which could also increase the likelihood of the Federal Reserve raising rates, causing a huge shock to the market.

Could Artificial Intelligence Be the Strongest Support for U.S. Stocks?

When discussing U.S. stocks, Su Bowen stated, "Currently, U.S. stock valuations are relatively high, and market uncertainty is relatively large."

From publicly available data, Su Bowen's concerns are not unfounded. By the end of 2024, the Nasdaq had surged nearly 30%, the S&P 500 rose by 23.8%, and the Dow Jones Industrial Average increased by 12.9%.

Focusing on the "seven sisters" that attract more market attention, Nvidia's cumulative increase in 2024 has reached a staggering 177.8%, while Tesla and Meta have both risen by over 60%. Amazon, Apple, and Microsoft have also shown double-digit increases. These seven giants account for nearly 30% of the total market capitalization of the S&P 500, almost dictating the trend of U.S. stocks.

Su Bowen also mentioned that these giants have performed well in recent years, with a relatively stable market base, and their investments in the field of artificial intelligence are also considerable.

Su Bowen believes that if artificial intelligence begins to yield more results in 2025, rather than just focusing on chip development, especially if artificial intelligence is increasingly applied in commercial fields such as banking, insurance, and pharmaceuticals in 2025, this will support large-scale investments in this area, which is also a key focus for future market observation

Gold Will Continue to Maintain Strength in 2025

In 2024, global gold prices hit new highs repeatedly, with New York gold prices rising from around $2,000 at the beginning of the year to a peak of $2,801.8, marking a maximum increase of 40%.

So, will international gold prices continue to maintain strength in 2025?

In this regard, Su Bowen stated, "In an environment where the global economy becomes more decentralized, geopolitical disturbances become more uncertain, and inflation risks remain, the upward trend of gold will be stronger."

However, it is worth noting that Su Bowen emphasized Bitcoin during the discussion, stating: "Five years ago, investors generally held a skeptical attitude towards Bitcoin, but over time, more and more investors are beginning to accept the possibility of cryptocurrencies as alternative assets."

Because Bitcoin, like gold, has good scarcity, and the strong performance of Bitcoin may also pose a potential challenge to gold prices