Fed Signals More Easing: Can S&P 500 ETFs Rally Further?

Group 1: Federal Reserve Actions - The Federal Reserve recently cut rates by 25 bps and indicated that two more reductions are likely by year-end, aimed at managing risks in a softening labor market [1][6] - The Fed's new projections suggest a benchmark rate of 3.50-3.75% by December, indicating a more aggressive monetary policy easing than previously anticipated [6][10] - Historical data shows that the S&P 500 has delivered an average return of 14.1% in the 12 months following the start of a rate-cutting cycle [11][12] Group 2: Corporate Earnings Outlook - For Q3 2025, total S&P 500 index earnings are expected to rise by 5.1% year-over-year, driven by a 6.0% increase in revenues [2] - Total S&P 500 earnings for 2025 are projected to increase by 9.3%, with a more robust growth of 10.4% when excluding the Energy sector [3] - The "Magnificent 7" companies are anticipated to contribute 25% of total S&P 500 earnings in 2025 and account for 34.3% of the index's market capitalization [3][4] Group 3: Impact of AI and Big Tech - The "Magnificent 7" stocks, which include major players in the AI sector, are expected to see Q3 earnings grow by 12.2% on 14.6% higher revenues [4] - For 2025, the Magnificent 7's total earnings are projected to increase by 17.6% on 10.5% higher revenues, significantly outpacing the rest of the S&P 500 [5] Group 4: Market Sentiment and Analyst Predictions - Analysts have raised their year-end target for the S&P 500, with Goldman Sachs and Yardeni Research both setting targets at 6,800 [9][10] - Wells Fargo's equity strategist expects a year-end target of 6,650, while Barclays has increased its 2025 outlook to 6,450 [10] - The S&P 500 closed at 6,664.36 on September 19, indicating that some targets have already been reached [10]