Market won’t calm down until the Fed’s rate path is clearer: Wall Street veteran Peter Kraus
The stock market will continue to see big swings until the Federal Reserve‘s path on interest rates is more clear, Wall Street veteran Peter Kraus told CNBC Thursday.
Fed Chairman Jerome Powell has clearly signaled he expects U.S. economic growth to slow but “not necessarily” go south, Kraus, chariman and CEO of Aperture Investors, said in an interview with “Squawk Box.” “[Powell] is not going to raise rates as much as he planned,” Kraus said. But he added the Fed’s dot plot diagram still says three hikes.
The Dow Jones Industrial Average surged 600 points Wednesday after Powell told The Economic Club of New York that rates are “just below” so-called neutral. It was a sharp turn from the Fed chief’s Oct. 3 comments that rates were a long way from neutral.
After Powell’s Wednesday comments, many traders said they see just one more rate hike next year. The central bank has already increased rates three times this year. The market expects one more in December.
Kraus, former AllianceBernstein CEO whose career in finance has spanned over four decades, expects the market will continue to see volatility. “That’s not going to change until there’s a clear vision of where we head out of this cycle.”
Powell had been under constant heat from President Donald Trump, who told The Washington Post on Tuesday that he blamed Fed policies, including its path on rates, for stock market declines and General Motors’ plan to cut production at several U.S. plants.
Kraus also said the market will continue to be impacted by trade tensions, which are running high between the U.S. and China.
Wall Street has been hoping that Saturday’s meeting of Trump and Chinese President Xi Jinping at the G-20 summit in Argentina will keep the trade dispute between the world’s two biggest economic superpowers from escalating.