Stocks will embark on a run of gains unseen in 30 years after the Fed cuts rates, Wells Fargo strategy chief says

• Stocks could be poised for a rally similar to that seen in 1995, according to Wells Fargo.

• The bank’s head of global investment strategy pointed to low inflation and a resilient economy.

• These conditions pave the way for the Federal Reserve to cut interest rates, which is positive for stocks.

Paul Christopher, head of global investment strategy at Wells Fargo, says stocks are poised for a rally not seen in three decades.

The banking expert pointed out the similarities between today’s market and the market 1995When the stock markets boomed and the S&P 500 hit an all-time high of 77.

Christopher noted that investors may be facing a similar environment. He said that’s because inflation is low and the economy is “not collapsing,” with the Commerce Department estimating that gross domestic product expanded at a 2.8% annual rate in the second quarter.

The Fed is “in a good position here if it can be proactive enough,” Christopher said. cnbc On Thursday, suggesting that central banks will deliver a 50 basis point rate cut in September followed by “two more” rate cuts through the end of the year. “We still have a good chance Soft ground this economy“He added.”

Markets have been anticipating a rate cut from the Federal Reserve since central bankers began raising interest rates in March 2022 to curb inflation.

But inflation is far from its peak in the summer of 2022. The Bureau of Labor Statistics said Inflation rose 2.9% year-on-year in July.

Christopher said Wells Fargo expects more volatility in stocks over the next few months, citing uncertainty caused by geopolitical tensions and Presidential ElectionsHe added that this period could be followed by some big gains for investors, assuming that the Federal Reserve will ease policy appropriately.

Christopher said that low short-term interest rates are likely to be beneficial. financial and Technology stocks “However, the trend is improving. Financial institutions are gaining more deposits while technology companies’ profits are improving. These two trends are “exactly what happened in 1995,” he said.

“Financials were at the forefront until tech took over, and then there was a general cyclical movement in stocks going forward,” Christopher said, adding, “We would definitely be more keen to invest in large-cap companies in the sectors you mentioned.”

Most stock forecasters expect More confusion In the coming months, investors will be watching for interest rate cuts from the Federal Reserve and the strength of the U.S. economy. New York Federal Reserve economists said they see a 56 percent chance that the economy will enter a recession by July.

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