GIM Trading puts eagle eye towards highly-anticipated rate shift

GIM Trading is preparing investors for one of the most uncertain rate movements in years

An upcoming Federal Reserve decision has been slated as the most uncertain since at least 2015. Pic: Getty Images

• Speculation mounts over highly anticipated Fed rate movement

• GIM Trading analysts have long anticipated a coming rate cut

• Growth slowdown not confined to world’s largest economy

• Australian housing borrowers under keen pressure

 

Special Report: GIM Trading takes stock and prepares investors for the financial fallout and real estate ripples to come from one of the most anticipated rate movements in recent memory.

As predictions and prophecy abound, the clock appears ready to strike midnight on one of the most anticipated interest rate movements in recent history.

US Federal Reserve chair Jerome Powell is now expected to confirm an interest rate cut as soon as Wednesday, but the volume of a raise, a trim, or perhaps a hack, remains wide open to speculation.

A conservative and more commonly predicted 0.25% reduction to rates hovering between 5.25% and 5.5% across the past year would be slated as an opening for lowered borrowing costs to aid a slowing US economy.

But there has been signs of a more dramatic movement in the tea leaves, and GIM Trading says it has been observing the wide-ranging ripple effects of a rate cut for some time now.

Some analysts have argued a larger cut could create market uncertainty, a sign the Fed see greater underlying economic strife, while others make a case the world’s largest economy remains in a relative state of calm.

Analysts from fast-expanding Australian asset management firm GIM have expected the cut to come for some time, noting an economic slowdown is hardly confined to the US.

Powerhouse economies of Europe and Asia face similar challenges, and the European Central Bank and the Bank of England have already moved on rate cuts to avoid recession.

The Reserve Bank of Australia is likewise under similar scrutiny on the home front.

With around a twentieth of Australian borrowers on variable-rate loans struggling to repay, Governor of the Reserve Bank of Australia Michele Bullock recently warned at the prospect of homeowners forced to buckle and sell under the pressures of high interest and inflation.

We don’t have to look far back to see the flow-on of a real estate dam break, and GIM Trading chief executive officer, Stephen Cubis says it has been closely monitoring the movements of the Fed and its Australian counterpart.

“With global economic uncertainties and fluctuating interest rates, it’s crucial for investors to stay informed and adaptable,” Cubis says.

“Any adjustments to interest rates can significantly impact investment strategies, and our goal is to ensure our clients are well-positioned to navigate these changes with confidence.”

Bank of America Global Research says the market uncertainty surrounding the decision is the highest it has seen since at least 2015, and while there will always be the unknown, an excess of financial fog brings its own consequences.

Evidence shows that higher uncertainty reduces investment, firm hiring activity, total employment, and aggregate productivity while increasing financial costs and stock market volatility.

And with the unknown mounting, the man about to make the call has signalled the Federal Reserve’s readiness to act.

“The time has come for policy to adjust,” Powell stated at a recent meeting at Jackson Hole.

But now we wait to see how.

This article was developed in collaboration with GIM Trading, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

Originally published as GIM Trading puts eagle eye towards highly-anticipated rate shift