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Ahead of interest rate cuts expected next week, Sound Income Strategies co-CIO Eric Beyrich joins Julie Hyman and Josh Lipton on Market Domination.
Beyrich says next week’s cuts will likely be 25 basis points as a 50 basis-point cut from the Federal Reserve would “would be a little desperate” and “signal that they're behind the curve.”
At next week’s Fed meeting, Beyrich tells Yahoo Finance he will “pay attention to what they say and what they do,” as well as looking “at the other economic data that come along with it.”
For more expert insight and the latest market action, click here to watch this full episode of Market Domination.
This post was written by Naomi Buchanan.
Eric Byrich, Sound Income Strategies, Co-Chief Investment Officer joins us now to discuss. Eric, great to see you here. So, you think next week, uh, the Fed, they're going to do a a traditional cut of of 25, Eric. How come?
Well, I think the the case for 25 is pretty strong. I think the case for 50 requires either more deterioration, and and we're seeing some of that, but I don't think quite enough, but it would also signal that they're behind the curve. And remember, the Fed was behind the curve in raising rates. Now they don't want to appear behind the curve in cutting rates. And also, if you pay attention to their language, it was really only at Jackson Hole that they finally admitted that they needed to do something. There was plenty of evidence in the market that they should be doing something by then. So I I just think out of caution and and due their nature, they're they're likely to just do 25.
Well, we were talking with a guest earlier, Eric, who talked about that it's not just about the first cut, of course, it's about how long they're going to be cutting and where they're going to be ending. And we're we're also getting the summary of economic projections, aka the dot plot on Wednesday. Um, what are you going to be watching for there?
Well, you know, we're going to see if if the world lines up with our expectations. We're thinking 25 basis points of meeting. Um, you know, it's just going to creep along. Remember, the economy is slowing down, but it's not in free fall. So, I think they they can take back some of the short end of the curve, normalize the yield curve, reinstate the carry trade and help everybody without looking desperate. Um, and I think a 50 move would would be a little desperate. So, we'll like everybody else, we'll pay attention to what they say and what they do, and we'll also look at the other economic data that come along with it. One of the common criticisms of the Fed is it's always looking backwards, and I think that's fair. So we also look at the incremental data. We had some data come out this week, you know, you saw the CPI numbers, the PPI numbers and so forth, and the sentiment numbers, and they're all like the typical sawtooth, a little bit, a little put, a little take, but generally the trends are in place. The economy is slowing, inflation is coming down, and jobs are weakening as well. So, the Fed has all the ammunition they need to cut. And, uh, ultimately that will either give us a soft landing, or if we have anything worse than that, it'll be very short-lived. Uh, one of the factors that we always talk about with people is that this cycle is different, because normally a business cycle ends when you build too much capacity, and then you need to rationalize the excess capacity. Here, we're having a slowdown still in an environment of shortages or dearth. So it's not a normal business cycle. And therefore we think the Goldilocks soft landing is really possible. Other people disagree, they look at the, you know, the sah mule and things like that, but this is really a unique time. The best parallel if you want to look at history, is just the post World War II era, when the economy repositioned for making, you know, war goods to making consumer goods, and there were significant shortages and high inflation as there was more want than there was material to serve it.