Expert who predicted rates would fall in 2014 says no hike in 2015

Back in January, Dan Alpert, Managing Director of Westwood Capital, stopped by Yahoo Finance and told editor in chief Aaron Task that he thought interest rates would be falling as the Federal Reserve ended its bond-buying stimulus program. With the Fed on track to wrap up quantitative easing this month, Alpert was right.

In a new conversation with Task, Alpert still asserts, “Interest rates are unlikely to rise." He also tells Task, "I don't think the Fed is going to be able to raise short term interest rates next year.“

Most economists believe the Fed will raise rates next year and had predicted rates would rise as the Fed tapered off QE3. Their hope was that the U.S. economy would gain steam as the bond-buying program ended. That hasn't happened, according to Alpert.

Investors normally abandon bonds for riskier investment as the economy strengthens. But Treasury bonds are looking more appealing to investors thanks at least in part to concerns about slowing global growth.

“The latter part of 2013 saw a falling knife phenomenon where nobody wanted to touch bonds because nobody really knew what was going to happen,” says Alpert. “The bond market is now reflecting both the anchored disinflation or deflationary expectations that are fundamental in the bond market,” he says.

JP Morgan Chase and Goldman Sachs have cut their interest-rate forecasts for the end of 2014. Goldman Sachs is expecting the 10-year U.S. Treasury note’s yield to end the year at 2.5%. Earlier the bank had predicted to the figure to be 3%. J.P. Morgan is expecting the 10-year note’s yield to end this year at 2.45%, after earlier expecting a yield of 2.7%.

Alpert says, “I think that this is a rational place for bonds to settle.”

But Alpert believes it’s possible we could see further drops. “Could another shock happen? Really bad data could come out of the U.S. Really bad data could come out of Europe that will drop things further.”