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Stock Market Strategist: ‘Fed Needs to Do Nothing’ with Red Hot Economy

Last Updated September 23, 2020 12:49 PM
Ian Bezek
Last Updated September 23, 2020 12:49 PM

The stock market is booming this summer. June was one of the strongest months on record. And July is bringing more good cheer: The S&P 500 just topped 3,000 for the first time this week. Meanwhile, President Trump celebrated the Dow Jones index crossing 27,000 today:

But one stock market strategist isn’t buying into the hype. Byron Wien of Blackstone’s Private Wealth division thinks the proposed rate cuts wouldn’t accomplish anything. On CNBC, Wien said:

“The economy doesn’t need a cut in rates. And with rates already so low, I don’t know how much good a cut would do anyway.”

Wien says that the economy is already growing as quickly as possible and that the job market remains robust. As a result, Wien says that the Fed cuts would do little to stimulate the economy. Instead, it would weaken the U.S. dollar while helping emerging economies.

What’s It Mean for the Stock Market?

At the start of the year, Wien predicted that the stock market would rise 15 percent in 2019. That was a bold call; remember that the stock market had plunged 20 percent to end 2018, and many analysts said that was merely a taste of a big new bear market.

Wien rightfully avoided that trap and instead was bullish on the market. But he sees the gains as fully played out. From our current rally, he sees stock prices consolidating around their current levels for the rest of the year. That’s in contrast to Skybridge’s Troy Gayeski, who says the Dow could top 30,000 within months.

Interestingly, Wien has changed his perspective on one matter. At the start of the year, he forecast that the price of gold would fall sharply to just $1,000/oz this year. Now, however, he sees a better outlook, which could bode well for crypto as well. Wien said:

“The move in gold is telling us that uncertainty is increasing…I think that people are losing confidence in financial assets, and so they want to have some of their assets in hard assets.

Would Sanders or Warren Cause Market Collapse?

At the beginning of the year, Wien said that the U.S. economy wouldn’t enter recession until at least 2021. That was a contrarian call that is looking brilliant at the moment given the almost too-good unemployment numbers. But Wien sees trouble on the horizon, saying:

“Elizabeth Warren, Kamala Harris, and Bernie Sanders are kind of terrifying to the market”

Polling data  shows those candidates as numbers two, three, and four in the running, trailing only Joe Biden. If one of them should get the nomination, Wien warns, it could be a big problem for the stock market which has become used to Trump’s pro-business policies.

While it’s fun to make predictions, the market sometimes plays political events wrong. Don’t forget that the stock market futures initially plunged 5% in the hours following Donald Trump’s upset over Hillary Clinton before sentiment turned around.