US Federal Reserve (The Fed)

Stocks fell on Friday, closing out the worst week in more than two months, as Trump trades lost steam and investors bet the US Federal Reserve will have to slow the pace of policy easing.

“As long we keep making progress toward the 2% inflation goal, over the next 12 to 18 months rates will be a lot lower than where they are now,” Federal Reserve Bank of Chicago Austan Goolsbee said.

TD Securities predicts the Fed will pause its interest rate cuts in the first half of 2025 so it can assess the impact of Trump’s economic plans.

BNY notes that this move has been 91% priced in.

Trump’s economic policy is seen as more expansionary and inflationary than that of Harris, making it less likely for the US Federal Reserve to aggressively cut interest rates.

In modern US elections, the losing candidate generally concedes within a day or two, but the 2020 outcome wasn’t called until four days later.

It’s the latest wrenching recalibration for traders who had been setting up for slowing growth, benign inflation and aggressive rate cuts.

“The amount of easing that’s in the forward curve is crazy. I do believe there’s room for easing more, but not as much as the forward curve would indicate.”

Investors will parse remarks from a large number of Fed officials in the coming week.

The Edge Singapore’s associate editor Samantha Chiew (fourth from right) was named Financial Journalist of the Year at ICA 2024.