Why stocks don't need Fed rate cuts to keep soaring in 2024

Stocks could notch another year of double-digit gains without the Fed's help, according to investing veteran Ken Fisher.

• Stocks don't need the Fed to cut interest rates to keep soaring, according to investing billionaire Ken Fisher.
• The Fisher Investments founder pointed to the stock market's run-up in 2023, despite no rate cuts that year.
• That's a sign there are more important levers pushing stocks higher, he said to investors.

Stocks actually don't need the Federal Reserve to lower interest rates in 2024 to keep soaring, according to Ken Fisher, the billionaire founder and co-CIO of Fisher Investments.

While markets are still betting that long-awaited cuts will transpire before the end of the year, investors actually have a misunderstanding of how interest rates affect different areas of the economy, Fisher said in a recent video sent to his firm's clients. 

Fisher pointed to the strength in stocks in 2023, when the S&P 500 soared more than 20% after hitting a bottom in October 2022. Meanwhile, the economy has continued to remain resilient, with GDP growing 3.1% over the fourth quarter, per the Commerce Department's latest estimate.

That all happened irrespective of interest rate cuts in the economy, Fisher said, suggesting there were more important levers driving the market.

"You don't need rate cuts. The back half of 2022 and 2023 showed that," he added.

According to Fisher, investors have likely already priced in the impact of Fed rate cuts into the market anyway, given how widely discussed the Fed's policy moves are. Markets are betting on a 60% chance the Fed could cut interest rates at least 100 basis-points by the end of 2024, according to the CME FedWatch tool.

"[Rates] don't have the effect on the overall economy, and by extension then, the stock market that many people think," he said, noting that GDP actually accelerated over the last two quarters despite higher interest rates in the economy. "Interest rates are just one mechanism of a very large system."

Investors have been anxiously waiting for high interest rates to come down for the last year. Central bankers hiked rates a historic 525 basis-points to tame inflation, a move that weighed heavily on stocks in 2022 and could overtightening the economy into a recession, economists have warned.

But Fisher has put himself among Wall Street's most bullish forecasters for the year, stating in late 2023 he believed the bull market in stocks still had room to run. The S&P 500 could end up seeing modest double-digit gains in 2024, Fisher wrote in a December op-ed for the New York Post, as strong growth and cooling inflation suggest the economy will end up avoiding a recession.

The path higher looks so clear, only a "supersized, surprise" Black Swan shock could upend the rally in stocks, Fisher said.

"None seemingly lurks. So, expect a good-to-great 2024," he added.

Investors have remained in good spirits about the stock market. Over 50% of investors said they felt bullish about stocks for the next six months, per the AAII's latest Investor Sentiment Survey. Meanwhile, over 80% of individual investors said they believed the Dow would end the year higher, the most positive investors have been about stocks since the year 2007, according to a Yale survey.