The Federal Reserve is expected to cut interest rates on Wednesday, but many economists believe this move may not be ideal due to uncertainty surrounding President-elect Donald Trump’s policies. According to a CNBC survey of 27 respondents, including economists and strategists, 93% predict the Fed will cut rates by a quarter-point, while only 63% think it’s the right decision.
The incoming administration’s fiscal policies have sparked mixed opinions. Some, like economists Troy Ludtka and Joseph LaVorgna, believe Trump’s election has boosted consumer sentiment, while others, including Robert Fry, are uncertain about the inflation outlook due to the president-elect’s proposed mix of inflationary and disinflationary policies.
A majority of respondents (56%) see the effects of these policies as “somewhat inflationary,” with 11% considering them “extremely inflationary.” The biggest risks to economic expansion are high inflation, global economic weakness, and the size of the US deficit. Tariffs remain a major concern, with 70% expecting Trump to implement additional tariffs on China.
The outlook for the S&P 500 next year is cautiously optimistic, but respondents increasingly see equities as overextended. The index is forecast to rise just 3% next year and 7% by 2026, according to the survey. Many believe stocks are overvalued for a soft-landing scenario, with 69% of participants considering them “overpriced.”
The probability of a recession in the next year has dropped to a new two-year low of 29%, while nearly 70% forecast a soft landing. The economy is expected to run above potential this year at 2.5%, but cool to 2.1% in 2026.
Source: https://www.cnbc.com/2024/12/17/fears-over-inflation-tariffs-cloud-the-economic-outlook-cnbc-survey-found.html