Today starts the event that investors have spent months pricing in: the meeting of the Federal Reserve's policy-making Federal Open Market Committee. And if all goes according to many investors' hopes, around this time tomorrow the U.S. will have cut interest rates for the first time since December 2024.
But does any 0.25-percentage-point cut save an ailing economy? Probably not. And analysts at many big banks seem to share a perspective on what will happen to stocks after a cut: They'll go down. A cut is being seen as a "sell the news" event, prompting some investors to reconsider.
Bloomberg News notes "President Donald Trump's unprecedented politicization of the central bank." And it reports: "David Kelly, chief global strategist at JPMorgan Asset Management, warns that the expected rate cut this week will actually increase risks for stocks, bonds and the dollar if it’s perceived to be driven by political pressure and doesn’t align with the central bank’s forecasts for the economy."
Tuesday Reading:.
Those forecasts will come in what's known as the Fed's Dot Plot. In tandem with the Fed's rate decision, the central bank will offer up the expectations of the Fed governors. And with that, investors might be able to get a better feel for whether they have adequately priced their own expectations for rates. Right now, market participants are biased toward as many as three rate cuts by year-end.
Meantime, all four major market indexes are down, with the Russell 2000 (-0.47%) and Dow industrials (-0.26%) posting the steepest losses. The S&P 500 (-0.17%) and Nasdaq (-0.09%) are more gently in the red. Is it the start of the downturn or just a bad day? Hard to tell, seeing as things have been so positive for traders going long.
TurboTax Via TheStreet:
-- Noah Weidner, Markets Reporter
