Fed cuts tonight! New Bond King: 50 basis points, Dalio: 25 basis points, Dimon: It's all irrelevant

As the first interest rate cut approaches, strategists are exhausted, the market is still "endlessly chattering," and the big shots are starting to speak out, causing a stir on Wall Street.

On one hand, the new Bond King "calls for" a 50 basis point rate cut, suggesting that the Fed is already "behind the curve"; on the other hand, Bridgewater Associates founder Dalio states that "a 25 basis point rate cut is the right move," while JP Morgan CEO Dimon takes a "nonchalant" attitude, saying "it's all small stuff."

New Bond King: Supports 50 Basis Point Rate Cut

The new Bond King Gundlach is making a "radical" bet, suggesting that the Fed may cut the benchmark interest rate by 50 basis points on Wednesday, totaling 125 basis points by the end of the year.

While many in the market believe that such an aggressive easing cycle will trigger fears of an impending recession in the U.S., Gundlach points out that the Fed is seriously "behind the curve" because "the U.S. economy is already in a recession, and the Fed has maintained policy tightening for too long." Gundlach stated:

"This is a clash of fire and brimstone."

However, some analysts believe that the current stock market has not yet shown signs of a recession, and once people realize how bad the situation is, the stock market will immediately collapse, causing trillions of dollars in market value to evaporate and making the recession even more severe. This is why the Fed is unlikely to hastily cut rates by 50 basis points.

Bridgewater's Dalio: 25 Basis Points is the Right Move

Bridgewater Associates founder Dalio's view differs from Gundlach's. He believes that from the overall economic situation in the U.S., the Fed may cut rates slightly this week. Dalio stated in an interview on Wednesday:

"The Fed needs to keep rates at a sufficiently high level to meet the real return needs of creditors, while also avoiding putting too much pressure on debtors. Overall, a 25 basis point cut is the right move."

During the 2024 Milken Institute Asia Summit, Dalio also mentioned, " If we look at the mortgage market, the situation is worse and the impact is broader, so the rate cut could be 50 basis points."

However, he also pointed out that regardless of how much the Fed ultimately cuts rates, "it doesn't matter in the long run." Dalio emphasized that policymakers need to keep real interest rates low so that people can repay the increasing debt.

It is worth noting that data shows that the cumulative interest on U.S. debt in the 11 months of the 2024 fiscal year has exceeded $1 trillion, reaching a historic high, and is expected to reach $1.2 trillion for the full year.

JP Morgan's Dimon: None of it Matters

Financial giant JP Morgan's CEO Dimon holds a "nonchalant" attitude towards the Fed's policy decisions, believing that whether the Fed chooses to cut rates by 25 basis points or 50 basis points, this move "will not be earth-shattering." Dai Meng stated on Tuesday that they need to do this, but the Fed's rate hikes and cuts are minor issues because the economic fundamentals are more important.

Previously, Dai Meng and Gonglak have been on opposite sides. For over a year, he has been warning that inflation may be more stubborn than investors expect. In his annual letter to shareholders in April, he wrote that his company is prepared for interest rates of 2% to 8% or even higher.

He also pointed out that people are overly concerned about whether the Fed will have a "soft landing" or a "hard landing":

"To be honest, most of us have been through these things, so they are not that important."