The Federal Reserve isn’t going to lower interest rates to save the stock market from the latest rout, meaning the S & P 500 may not bottom out until it reaches 4,600, says Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “Fiscal government is not going to step in here to provide stimulus to offset this. Fiscal government is the cause of it,” Zentner said on CNBC’s ” Closing Bell ” on Tuesday. “The Fed is not swooping in to save us from tariffs.” “If you’re a … Fed member and you grew up through the ’70s like I did, you’re terrified of inflation expectations becoming unanchored and growth being slow,” said Zentner, who is also the global head of thematic and macro investing. “Right now, the data is okay. They can afford to just sit here.” Many investors are hoping the central bank will cut rates to offset an economic slowdown, especially if it becomes an outright contraction. Markets were last pricing in four quarter-percentage-point cuts by the end of 2025, according to the CME Group’s FedWatch tool , which bases its probabilities on trading in 30-day fed fund futures contracts. Zentner’s view that the S & P 500 may fall further, to 4,600, implies more than 7% downside from Tuesday’s close. Stocks peaked in mid-February but have lately suffered a four-day slump in the aftermath of President Donald Trump’s tariff announcement last week. “There’s more room to go there,” Zentner continued. “You could get some really big jump to the upside, but it would take this president capitulating, and I don’t think we’re seeing any evidence of that.” Trump’s steeper “reciprocal” tariffs are set to go into effect at midnight, and are in addition to the 10% baseline tariff that took effect Saturday. A 104% tariff rate on Chinese imports are among those the U.S. will impose. With Trump seeking to rebalance global trade, Zentner said that a byproduct will be capital outflows from the U.S. “You’re losing a bit of that U.S. exceptionalism shine, and an unintended consequence of that is that financial markets suffer,” the strategist added. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
