Breaking news! The Fed is required to cut interest rates by 75 basis points, will the market face a huge shock?
Recently, the trend of U.S. stocks has been quite eye-catching. The Nasdaq index has seen mixed gains and losses, basically hovering near flat, but there is an important factor hidden behind it: the market is being protected.
Especially large bank stocks, which frequently rise and fall, are obviously supported by funds to prevent their performance from being too bad.
The reason for the support is closely related to the Fed's expectations of interest rate cuts.
Market expectations for the extent of the Fed's interest rate cuts have changed significantly recently.
Last Monday, the market believed that the probability of a 50 basis point interest rate cut was only 15%. By Friday, this probability jumped to 50%. At the close yesterday, it soared to 67%.
It can be seen that the call for a 50 basis point interest rate cut has become quite strong.
It is worth noting that some people even asked the Federal Reserve to cut interest rates by 75 basis points in advance to reduce pressure on the labor market.
This is essentially an attempt to force the Fed to cut interest rates by at least 50 basis points, as a 25 basis point rate cut simply won't solve the problem. Such calls undoubtedly put pressure on Wall Street financial institutions.
Why is everyone so eager to push the Federal Reserve to cut interest rates?
The reason is simple - many banks are on their last legs.
Large financial institutions such as Bank of America have purchased a large amount of high-priced government bonds during the period of low interest rates. The current interest rate hike cycle has caused them to face serious book losses. Therefore, they are eager to cut interest rates as soon as possible, otherwise they will face a huge financial crisis.
The current situation is quite delicate. If the Fed cuts interest rates by just 25 basis points in September, the market may react tepidly, leading to a wave of selling, especially in bank stocks.
If interest rates are cut by 50 basis points, although it is in line with expectations, it may trigger secondary inflation. U.S. stocks will fluctuate slightly, and technology stocks may lead the decline. ➕👗➩BNB0098
And if interest rates are really cut by 75 basis points, it means that the U.S. economy may have begun to enter recession, and the risk of a plunge in U.S. stocks will increase significantly, although this scenario still seems unlikely.
In short, the pressure on the U.S. stock market has not yet been completely released, the extent of the Fed's interest rate cut has not yet been determined, and various voices are emerging in the market. In this "big drama" of interest rate cuts, everyone needs to remain vigilant.
