Stocks might ‘go nowhere’ for the rest of this year amid Fed uncertainty and US debt concerns, market vet says

• Ed Yardeni says the S&P 500 may remain flat for the rest of the year.

• The market expert believes there will be no further Fed rate cuts until 2025 as the economy remains strong.

• He added that US government debt will also continue to rise, limiting the Fed’s ability to lower interest rates.

Market veteran Ed Yardeni said the stock market may be hitting a ceiling right now.

The longtime investor and president of Yardeni Research said he sees limited ability for central bankers to cut interest rates, thanks to the strength of the U.S. economy and a worrying outlook for the federal debt stock.

That means further policy easing may not come until 2025 — and the S&P 500 could remain stuck at around 5,800 until the end of the year, he said in a recent note to clients.

This means gains of less than 1% for the benchmark index in the next two months.

Stocks haven’t moved “anywhere” quickly since the Fed issued a major rate cut in September, Yardeni said. The S&P 500 is up 2% since the Fed’s last policy meeting, while the equal-weighted S&P 500 is up 3.8%.

“We expect it may not move as quickly through the rest of this year either, hovering around 5,800. Fiscal policy prospects will likely remain troubling after the election and the Fed may not cut Fed rates during the rest of this year after all,” Yardeni wrote.

Yardeni pointed to the strength of recent economic data, suggesting that further interest rate cuts may not be announced during the Fed’s meeting this week or in December.

For example, real GDP growth was strong in the third quarter, rising 2.8% year-on-year.

Investment in commercial equipment rose 11% during the third quarter, after a nearly 10% increase in the previous quarter. Investment in information processing equipment, in particular, has reached a record level, according to data from the Bureau of Economic Analysis.

Weakness in the labor market This has worried some investors, as the United States added far fewer jobs than expected in October. However, analysts said the labor market weakness was at least partly a result of events including Union Strikes and Hurricanes Helen and Milton.

More importantly, the unemployment rate remained near a historic low last month at 4.1%.

“The bond market is consistent with our view that the Fed cut the federal funds rate too much and too soon,” Yardeni added, pointing to the recent rise in bond yields, which indicates higher interest rate expectations among bond investors.

Meanwhile, government borrowing appears set to increase over the coming months, a factor economists have said could happen Inflation fuels inflation indirectlythus limiting the Fed’s ability to lower interest rates.

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