Guggenheim Foresees More Fed Rate Cuts Ahead to Prop Up Slowing Economy

According to Anne Walsh, the chief investment officer of Guggenheim Partners Investment Management, the Federal Reserve is likely to cut interest rates again in December 2025 amid mounting evidence of an economic slowdown. Walsh notes that the Fed Beige Book, which provides an overview of economic conditions, indicates "a lot more slowing and fraying around the edges" in the broader economy.

Walsh observes a "bifurcated economy" where lower-income consumers and small businesses appear to be struggling, while wealthier individuals and larger companies are prospering. This "two-speed economy" is reflected in the Beige Book's assessment of a "much more sluggish" overall economic landscape.

In response to these signs of weakness, Walsh believes the Federal Reserve will adopt a lower neutral rate, perhaps around 3%, and implement further rate cuts. She also contends that additional rate reductions are likely in 2026 as the central bank seeks to support the slowing economy.

Despite the late-cycle nature of the economy, Walsh remains optimistic, stating that lower interest rates and tax benefits from the One Big Beautiful Bill Act should keep the US out of a recession. She is also not concerned about potential overvaluation in artificial intelligence stocks, as today's technology companies are generating profits and avoiding excessive debt-fueled expansions.