Markets' 'Crazy' Rate-Cut Expectations Could Mean Trouble: State Street

The financial markets’ expectations that the Federal Reserve will cut interest rates this year — despite signals to the contrary — could spell trouble for stocks, a State Street Global Advisors strategist cautioned this week.

“I’m a little concerned that the markets seem to be losing their faith in [Fed Chairman] Jerome Powell and what he says,” George Milling-Stanley, chief gold strategist at the firm, said in an interview Tuesday with Yahoo Finance.

“Powell, I think, has made it pretty clear that he sees no possibility of a rate cut in 2023, and yet I understand that the markets right now are actually betting on a rate cut as soon as June of this year,” he said.

This market expectation seems “kind of crazy,” Milling-Stanley added.

“I think that’s leading to some exuberance in some sectors of the stock market, which I frankly don’t think are warranted. And I think that we have a lot more uncertainty coming. And if the markets are starting to lose faith in the people who are controlling interest rates, then I think that things are just going to get worse from here,” the strategist explained.

Investors will need more safe havens, including gold, in that case, Milling-Stanley said.