Analysts are warning there could be zero rate cuts in 2024 - and stocks could suffer if the Fed doesn't move

• Some analysts are eyeing zero rate cuts from the Fed this year.
• RBC's Lori Calvasina forecasts that a no-rate-cut scenario would pull the S&P 500 down 8.5%.

After the latest jobs report all but dismissed an interest rate cut in July, some analysts are taking it a step further, and expect no rate cuts at all this calendar year.

That's more pessimistic than what investors continue to bet on, with fed fund futures indicating at least one 25-basis point rate cut to occur in 2024. It's also a massive about-face for the market that was expecting as many as seven cuts at the beginning of the year.

Yet, to RBC's head of US equity strategy, Lori Calvasina, even one cut is too much. Yet, with stock markets priced around the forecast of looser monetary policy, indexes could tumble if the Fed doesn't move, she told Bloomberg.

She said that in a scenario where interest rates don't ease this year, inflation remains stickier than anticipated, and Treasury yields stay elevated, the benchmark S&P 500 could slide as low as 4,900, indicating an 8.5% drop from current levels.

But there's reason to keep rates higher for longer, others have noted.

According to market veteran Ed Yardeni, the Federal Reserve should "take a vacation," and leave interest rates unchanged through 2024, he told CNBC-TV18. In his view, the central bank has managed to normalize rates to where they should be and has done so without denting the economy.

"If they go ahead and lower interest rates without being necessary, they could get a melt-up in the stock market, which would create other problems, as we saw in the late 1990s," the Yardeni Research President said, referring to the equity bubble burst that occurred that decade.

Instead, markets can expect one or two cuts over the next 12 months, he said, but not through the end of this year.

Meanwhile, Catalyst Capital's David Miller agreed that the Fed shouldn't cut interest rates in 2024, citing that this would allow inflation to run hotter.

There are, of course, those on the other side of the argument.

On Monday, Moody Analytics chief economist Mark Zandi cautioned that the longer rates remained high, the more chance something breaks in the economy.

"I've got this image in my mind of the system as an engine, and it's shaking tremendously under the stress of these higher rates," he told Bloomberg. "So far it has held together with a little duct tape and some help from the Federal Reserve and banking regulators. But for how long, and why? Why would you do this?"