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A summer Fed rate cut is 'where the investor hype is right now'

Jennifer Shanker
Production Assistant

Trade tensions are taking a back seat in the markets right now as investors turn their focus to the Fed potentially cutting rates this summer.

“The expectation is to set the pathway for July rate cut of potentially 25 basis points given the weak jobs numbers, that we missed expectations quite a bit this past month — and that’s really where the investor hype is right now,” Walser Wealth Management President Rebecca Walser said on YFi AM. “We have sort of already priced in this cut, so it’s going to give us a little bit of a problem if we don’t see that the Federal Bureau Market Committee is leaning in that direction.”

The Federal Open Market Committee (FOMC) is set to hold a two-day policy meeting on Wednesday and Thursday, followed by more FOMC meetings on
July 30 and 31.

Walser also noted that Commerce Secretary Wilbur Ross lowering expectations ahead of the G-20 summit later this month is good for investors since strategists like Walser don’t want “investors to sort of start expecting that this G20 meeting at the end of the month is going to be... some kind of resolution of the trade. It is going to actually take, I think, a little bit longer to actually resolve itself.”

Federal Reserve Board Chair Jerome Powell speaks during a press conference after a Federal Open Market Committee meeting in Washington, DC, on May1, 2019. (Photo: MANDEL NGAN/AFP/Getty Images)

‘That’s going to put a lot of pressure on China’

Furthermore, Walser believes that the real guidance on the U.S.-China trade war comes from specific companies.

“Huawei coming out this morning and saying they’re going to miss revenue by $30 billion, I think that’s really significant and I think that’s going to put a lot of pressure on China,” she said.

U.S. President Donald Trump and China's President Xi Jinping arrive at a state dinner at the Great Hall of the People in Beijing, China, November 9, 2017. REUTERS/Thomas Peter

Walser also takes into consideration Trump’s long term plan to prevent China from leading the U.S. on for too long without any meaningful change.

“What we have to realize is what [the Chinese negotiators are] looking for is status quo,” she said. “They've made a lot of money, and gratefully the market's done very well with these stocks because we've had really cheap labor out of China. But China has got a Made in 2025 program where they're trying to become a much more sophisticated economy and no longer be a low-cost producer of labor in the world.”

Walser added that President Trump is “trying to change the tune and the story now on our time frame ... as opposed to China's time frame, which is basically string us along, keep it status quo, and then say: ‘Oh, sorry, we're not doing this anymore. We're now surpassed you economically as the economic superpower of the world.’”

Jennifer is a Production Assistant for Yahoo Finance. Follow her on Twitter @shankerjennifer

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