Trading Day: Fed cuts, markets not sure where to look

Group 1 - The Federal Reserve has cut interest rates by 25 basis points, with expectations for at least another 50 basis points of easing this year due to growing labor market risks [4][7][10] - The market reaction to the Fed's decision was mixed, with bond yields rising and the dollar index falling to its lowest since February 2022, while the S&P 500 and Nasdaq fell, and the Dow and Russell 2000 rose [5][7] - The rotation from Big Tech and growth stocks into small caps and cyclicals was observed during the summer but has cooled in September, indicating potential shifts in market sentiment [2][3] Group 2 - The impact of tariffs on the U.S. economy has not yet been fully realized, with stronger-than-expected retail sales in August and a projected Q3 growth rate of 3.4% [8][9] - U.S. firms have shouldered 64% of the tariff burden, with expectations that this will shift to 1% for consumers and 63% for firms, potentially affecting consumer prices [9] - The Fed's easing cycle is occurring while many global central banks are winding down their own easing, creating a divergence in monetary policy that may lead to volatility in global markets [10][12][13] Group 3 - The current Fed easing cycle may provide a tailwind for global equities, especially if it leads to a 'soft landing' without a recession, which is already being priced into the market [17][18] - Analysts suggest that equities are in the early stages of an upswing, with some expecting a potential 'euphoria' phase, particularly in Europe and Japan [19] - The risk remains that the Fed may not meet aggressive easing expectations, which could tighten global financial conditions and lead to a market correction [20]