Analyst advises against alarm over Jumbo 50 basis points Fed rate cut.

• One analyst believes that the U.S. Federal Reserve can make a 50 basis point rate cut next week without causing market panic.
• On Monday, Michael Yoshikami, CEO of Destination Wealth Management, stated that a more significant reduction would show the central bank's readiness to act without conveying further worries.
• It is anticipated that policymakers will reduce rates during their meeting on Sept. 17-18, but the magnitude of the change is uncertain.

An analyst has suggested that the U.S. Federal Reserve can make a 50 basis point rate cut next week without causing market panic, despite differing opinions on the central bank's upcoming meeting.

On Monday, Michael Yoshikami, CEO of Destination Wealth Management, stated that a deeper cut by the central bank would show that it is prepared to act without signaling a broader economic downturn.

"Yoshikami stated on "Squawk Box Europe" that he would not be surprised if they reached 50 basis points."

"The Fed's actions to support jobs growth are viewed as a positive sign, and it is ready to take proactive measures."

Joseph Stiglitz, a Nobel Prize-winning economist, echoed his comments on Friday, suggesting that the Fed should reduce interest rates by half a point at its next meeting. He argued that the Fed's previous policy tightening was excessive and should be adjusted.

It is anticipated that policymakers will reduce rates during their meeting on Sept. 17-18, but the magnitude of the move is uncertain. A dismal jobs report on Friday sparked concerns about a sluggish job market and momentarily swayed market predictions towards a more substantial reduction, before reverting back.

The CME Group's FedWatch Tool indicates that traders are pricing in a 75% chance of a 25 bps rate cut in September, while 25% are pricing in a 50 bps rate reduction. A basis point is equivalent to 0.01 percentage point.

Yoshikami acknowledged that a larger cut could reinforce fears that a "recessionary ball" is coming, but he insisted that such views were overblown, stating that both unemployment and interest rates remain low by historic levels and company earnings have been strong.

The recent market sell-off, which resulted in the S&P 500 experiencing its worst week since March 2023, was due to "massive profits" accumulated in August. Despite a volatile start to September, all major indices posted gains, while this month is typically a weaker trading period.

ABP Invest's founder and chief investment officer, Thanos Papasavvas, acknowledged a "growing concern" about a possible economic downturn.

The research firm has revised its forecast for a U.S. recession from a "mild" 25% in June to a "relatively contained" 30%. Despite this, Papasavvas stated that the economy's underlying components, including manufacturing and unemployment rates, remain resilient.

Papasavvas told CNBC Monday that there's no need to worry about a U.S. recession.

In contrast to other market watchers, such as economist George Lagarias, who warned CNBC last week that a bumper rate cut could be "very dangerous," the perspectives of other market observers are different.

"Forvis Mazars' chief economist stated on CNBC's "Squawk Box" that there isn't a sense of urgency for the 50 basis point cut."

The 50 basis point cut could send a wrong message to markets and the economy, potentially leading to a self-fulfilling prophecy, according to Lagarias.