The most accurate analyst on Wall Street: It's no longer about “to cut or not to cut”, or “when to cut”, but rather “whether cutting interest rates is still effective”.
According to Michael Hartnett, Chief Strategist at Bank of America, significant interest rate cuts from the Federal Reserve are necessary to prevent a recession. If certain key indicators are breached, the Wall Street narrative will shift from a soft landing to a hard landing. Hartnett recommends focusing on the US NFIB Small Business Confidence data, which will be released on Tuesday.
What will happen to the US stock market every time the VIX soars?
Bank of America Merrill Lynch pointed out that in the 4 to 8 weeks following the first surge of the vix index, the S&P 500 index tends to struggle; when the vix surges to over 45 points within a week, the S&P 500 index often achieves a high ROI in the following 13 weeks, 26 weeks, 39 weeks and 52 weeks.
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Unfazed by the black week in US stocks, many individual investors are seizing the opportunity to buy low.
According to multiple reports, individual investors were active buyers during the recent stock market crash in the U.S. However, they also showed some signs of caution while buying the dip, increasing their allocation to defensive assets.
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After the extreme volatility of the roller coaster market, has the US stock market hit rock bottom?
Goldman Sachs believes that the current US stock market has bottomed out, and it is expected that the market will present a trend of volatility but overall growth in the future. JPMorgan is more cautious, stating that the worst period for the US stock market may have passed, but uncertain factors such as the September interest rate decision, seasonal weakness, and pessimistic sentiment will bring more downward risks.
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It's not just about interest rate cuts, Wall Street also expects the Fed to stop shrinking its balance sheet.
In the face of the complex economic situation in the USA, it is worth paying attention to how much pressure the balance sheet of the Federal Reserve can bear as it shrinks, and the upcoming interest rate cuts may also have a reverse effect on reducing the balance sheet.
Will the financial market welcome a "heavy bullish"? The Federal Reserve may end this round of asset reduction by the end of this year.
Since June 2022, the Federal Reserve began implementing quantitative tightening policy, known as shrinking its balance sheet (QT); some Wall Street strategists have said that even though the pace of the balance sheet reduction has slowed recently, it is unlikely that a sudden announcement to end the balance sheet reduction will be made.
Morgan Stanley: The lack of "urgency" by the Fed will lead to more risks for the US stock market.
Dubravko Lakos-Bujas, JPMorgan's new head of market strategy, wrote in his first report that the recent collapse of the US stock market has dissipated some of the bubbles in the market, but if economic growth continues to slow down and the Fed does not show urgency in monetary easing, then holding positions and valuations still face risks.
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