The stage is set for 2 rate cuts this year, but investors need to be careful adding more exposure to the stock market, JPMorgan strategy chief says

• Recent data makes the Federal Reserve ready to cut interest rates twice this year, said David Kelly of JPMorgan Chase.

• The bank’s chief global strategist expects the Federal Reserve to cut interest rates in September and December.

• However, he cautioned that the stocks are expensive, and investors should be wary of adding exposure at high valuations.

The US Federal Reserve is expected to cut interest rates twice in 2024 as data shows the economy is gradually slowing, but bullish investors should be cautious as high stock prices are at risk of a major correction, according to David Kelly of JPMorgan Asset Management.

The chief global strategist expects central bankers to start cutting interest rates at their September policy meeting, with another cut likely in December.

He added that this was made possible by the slowing economy, pointing to the latest jobs report, which showed the unemployment rate rising to 4.1%, the highest reading in nearly three years.

But Kelly said the rate cut shouldn’t be a signal to investors to rush into the stock market. He pointed to sky-high valuations, with the S&P 500 hitting record after record this year.

“This is a time when we have to be very careful here, because valuations are high. We’ve seen a huge spike last year and this year,” Kelly said. cnbc “In general, these markets are high, and sooner or later we are going to see a big correction, and what I know about previous corrections is that when you are in a correction, you don’t want to be in the most expensive things.”

The S&P 500 has gained 17% so far this year, partly due to enthusiasm over the Federal Reserve’s interest rate cuts and the market’s continued enthusiasm for artificial intelligence, with Mega Cap Technology Stocks Most profitable index holder.

“In some ways, the economy is building bubbles in the markets because it’s so stable,” he added. “But we’ve seen this continued upward movement in stock prices. I think this is a time when people need to be very careful about diversifying their exposure and not getting too much exposure to the most expensive names.”

Kelly’s position reflects the position of Other bearish forecastsInvestors have warned of a correction on the horizon as stocks look overvalued. By some measures, the S&P 500 is the most overvalued since before the global financial crisis. Stock market crash of 1929According to the legendary investor John HousemanHe said a 70% drop in stock prices would not be surprising.

Read the original article on Interested in trading