S&P 500 and Nasdaq 100 in Turmoil: Experts Call for Drastic Interest Rate Cuts

The persistent downturn in the stock market has shifted the spotlight onto the US Federal Reserve (Fed), whose sluggish response to the cooling economy has been criticized by numerous market observers. The S&P 500 has recorded a dramatic decline of up to 7% since the Fed's last rate-setting meeting, while the Nasdaq 100 has faced losses of up to 10%. Jeremy Siegel, a professor at the Wharton School, voiced his discontent in an interview with the financial news channel CNBC. In his view, the current mistake of the Fed is its failure to act in a timely manner. Siegel urgently calls for a rate cut of a total of 150 basis points over the next two months and explained his demand for an immediate "emergency cut" of 75 basis points, followed by another 75 basis points next month. Siegel, a long-time critic of Fed Chairman Jerome Powell, sees the current rate policy as a repeated mistake. "Since when has the Fed really understood the economy?" Siegel asked rhetorically, pointing to missed opportunities in 2021 and 2022. In his eyes, the Federal Reserve is the main problem triggering the current market uncertainty, not the upcoming presidential elections or geopolitical tensions. JPMorgan strategist Mislav Matejka also voiced criticism of the Fed's rate policy in a report. He believes that the lack of rate cuts in the first half of the year will weigh on economic development for the rest of the year. Even future rate cuts will likely not be sufficient to spur a recovery as they are too reactive and belated. Another aspect was highlighted by Nicholas Colas, the co-founder of DataTrek. Colas believes that Powell's strategy might aim to convince the markets that the Fed remains determined to fight inflation despite a potential recession, similar to former Fed Chairman Paul Volcker's actions in the 1980s. Regardless of the Fed's motivations, John Lynch, CIO of Comerica Wealth Management, sees a clear message: the growing belief that the Fed has waited too long and is now lagging behind.