ELD Asset Management predicts that a shift in Federal Reserve policies could lead to a new stock market supercycle, driven by potential rate cuts and sustained economic growth, despite trade policy uncertainties.
SINGAPORE, SINGAPORE / ACCESS Newswire / February 24, 2025 / Investment and wealth management practice, ELD Asset Management has used the occasion of its latest scheduled client research note to advise that a new stock market supercycle may be on the horizon.
With inflation largely contained and economic growth stabilizing, it suggests that investors are weighing the likelihood of rate cuts and their potential to drive a prolonged bull market. Indeed, if recent cuts from the European Central Bank and the Bank of England are anything to go by, the Federal Reserve may not be too far behind. However, it cautions that President Donald Trump's tariff-heavy trade policies could introduce new complexities that may challenge the Fed's easing trajectory.
Could the Fed usher in a new supercycle?
ELD Asset Management's research note reasons that, historically, a central bank shifting from tighter to looser monetary policy has fueled long-term market expansions by making borrowing cheaper, boosting corporate profitability, and increasing investor appetite for risk assets. If the Fed proceeds with rate cuts in 2025, it could set the stage for a multi-year rally in equities, led by technology, consumer discretionary and industrial sectors.
"Lower interest rates wouldn't just support corporate earnings but they'd also drive valuations higher across the board, particularly in high-growth sectors like artificial intelligence, semiconductors, and cloud computing," said ELD Asset Management's Director of Private Clients, George Palmer. "If the Fed follows through with rate cuts without significant disruptions, we could see the start of a new supercycle in the stock market."
Will Trump's protectionism disrupt the Fed's plans?
Despite strong economic tailwinds, the Trump administration's renewed focus on protectionist trade policies presents a wildcard for the Fed in its efforts to set monetary policy. Tariffs on imports from China and other major trading partners could reignite inflationary pressures by increasing costs for U.S. businesses and consumers.
If inflation were to reaccelerate due to supply chain disruptions or rising input costs, the Fed could be forced to pause or slow its rate-cutting trajectory-potentially muting stock market gains. However, if tariffs are implemented selectively and inflation remains under control, the Fed may have room to cut rates aggressively, sustaining the current market rally.
How rate cuts could impact investment strategies
If the Fed lowers rates as expected, the impact could be far-reaching across the U.S. economy and wealth management strategies:
Equities: Lower interest rates tend to drive growth stocks, particularly in technology, AI, and semiconductors, by reducing the discount rate on future earnings. Companies like Microsoft, Nvidia, and Alphabet could see renewed momentum.
Fixed income: Bond yields could decline, boosting the value of existing bonds. This could make corporate bonds and high-yield debt attractive alternatives for investors seeking enhanced income.
Real estate: Lower mortgage rates could reignite demand in the housing market, benefiting real estate investment trusts (REITs) and homebuilders.
Wealth management strategies: Throughout 2025, portfolio diversification will be key. While rate cuts would favor equities, investors must remain vigilant of geopolitical risks and inflationary pressures that could re-emerge due to tariff policies.
Vigilance advised
Although the Fed's next move could be the catalyst for a new stock market supercycle, investors must keep a mindful eye on the potential headwinds posed by trade tensions. While rate cuts are generally bullish for risk assets, strategic asset allocation and active risk management will be crucial in an environment where trade policy and monetary policy collide.
About ELD Asset Management:
At ELD Asset Management, we combine research-driven strategies, personalized solutions, and a commitment to transparency to help you achieve your financial goals. With a global perspective and local expertise, we offer tailored investment solutions that prioritize long-term growth and stability.
ELD Asset Management Pte. Ltd.
Media Contact: Mr. Luke Tan
Email: luke.tan@eldglobal.com
Website: https://www.eldglobal.com
SOURCE: ELD Asset Management
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