Nigel Green sees, at most, one rate cut in 2025. The deVere Group CEO said that is based on a mounting realization that inflation remains dangerously sticky, and the interest rate needed to bring it fully under control needs to remain higher than many previously anticipated.
Minutes from the Federal Reserve’s Dec. 17–18 meeting show some participants noted it might be prudent to pause rate cuts if inflation readings remain above target or economic momentum persists. The last 25 bps rate cut was broadly supported, but the majority also favored a cautious approach to further easing.
Despite the December quarter-point cut, Green there seems to be little appetite for further reductions, as central bankers confront a robust US economy and fears that inflation could become entrenched if rates are eased too quickly.
Fed Chair Jerome Powell has previously described the current economic landscape as akin to “driving on a foggy night or walking into a dark room full of furniture.”
“The uncertainty stems from the dual pressures of sticky inflation and unpredictable economic impacts from the incoming Trump administration’s tariff and tax policies,” Green said.
For the Fed, the path forward is fraught with risk. The minutes appear to highlight fears that inflation may not fall back to the 2% target without maintaining or even increasing the current level of monetary restriction.
“The Fed understands the stakes here,” said Green. “Premature rate cuts could risk fueling further inflation, damaging its hard-won credibility and forcing even harsher measures down the line.”
The Fed’s hawkish tone carries profound implications for investors. Green outlines four critical strategies to capitalize on the shifting environment:
Bond market opportunities
“After two years of higher rates hammering bond prices, fixed-income assets are now a beacon of value,” Green said. “Long-term government and corporate bonds are poised to deliver stable returns as inflation expectations moderate and risk-averse investors seek safe havens.”
Focus on quality equities
“Investors should pivot to companies with strong balance sheets, stable cash flows, and proven pricing power,” he added. “These firms are better equipped to thrive in an era of elevated borrowing costs and persistent inflation.”
Inflation hedges are non-negotiable
Gold, Bitcoin, and broad-based commodities remain indispensable tools for portfolio protection.
“In addition, dividend-paying stocks offer the dual advantage of income and resilience against inflation’s erosive effects,” Green noted.
Avoid overexposure to risky sectors
Sectors reliant on cheap borrowing, such as tech and growth stocks, typically face amplified headwinds in a higher-rate environment. Instead, Nigel Green recommends considering shifting toward sectors that benefit from steady economic demand, including energy, utilities, and healthcare.
Green believes that 2025 will see a drastic slowdown in the pace of rate cuts because the Fed recognizes that taming inflation will take longer and demand more discipline than previously anticipated.
“Markets hoping for a dovish pivot are in for a reality check,” he warned. “Investors must adapt to the new normal of elevated rates and focus on robust, diversified portfolios. Those who ignore the Fed’s implied messaging in the minutes will do so at their peril.”