The three 'faces' of financial markets before what is expected to be the first US central bank cut since 2020.
Are these the three 'faces' of financial markets before what is expected to be the first US central bank cut since 2020? This Thursday, 4:00 am Sydney time, the US Fed is expected to cut interest rates by 0.25%.
There's a rising probability they could cut by 0.50%. How much they cut by is NOT the elephant in the room. What is really key to financial markets and the economy is what rate cuts are on the runway ahead for the next year or so.
Why and what does this mean?
1- Well, interest rate cuts are a positive tailwind in supporting stocks and company profitability.
2- Rate cuts are also a positive for commodities (as they're in US dollars/ the US dollar faces downside).
So, this meeting is not the be-all and end-all, as markets are forward-looking, expecting more rate cuts to come and expect 1% of rate cuts from November to March.
Markets also know interest rate moves can lag 29 months (that's according to the Fed Reserve Bank of St Louis). So this is why the Fed mapping out further rate cuts (in their dot plot) and making subsequent cuts is supportive of markets.
1- Well, interest rate cuts are a positive tailwind in supporting stocks and company profitability.
2- Rate cuts are also a positive for commodities (as they're in US dollars/ the US dollar faces downside).
So, this meeting is not the be-all and end-all, as markets are forward-looking, expecting more rate cuts to come and expect 1% of rate cuts from November to March.
Markets also know interest rate moves can lag 29 months (that's according to the Fed Reserve Bank of St Louis). So this is why the Fed mapping out further rate cuts (in their dot plot) and making subsequent cuts is supportive of markets.
Some of these points were rasied in the Ausbiz TV segment here:
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Moomoo Official Market Strategist
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