Bank of America Strategist Hartnett Sees "Panic Rate Cuts" Driving Market Rally

Bank of America's renowned strategist, Hartnett, has pointed out that the current market response to the Federal Reserve's potential 50 basis point rate cut seems to be following a script of either "soft rate cuts" or "panic rate cuts." Both the stock and credit markets are digesting expectations of the Fed cutting rates by 250 basis points by the end of 2025, alongside a projected 18% growth in earnings for S&P 500 constituents. Despite this, Hartnett believes "risks are not any better," and thus investors are compelled to chase gains, leading to a resurgence of "bubble risk."

Explaining the reason behind this frenzied rally, Hartnett's latest report suggests that Wall Street favors "panic rate cuts" when there's no panic (at least not yet). Furthermore, the Fed is keen on a 50 basis point rate cut to lower real interest rates from their highest levels this century, which would prevent job cuts in the already struggling small business sector.