Market Overview - Stocks experienced gains last week, with the S&P 500 increasing by 0.8% and the Nasdaq Composite rising by 0.9%. The Dow Jones Industrial Average, however, fell by 0.5% [2] - The market's focus is on economic data reports and their potential impact on the upcoming Federal Reserve Open Market Committee meeting [2] Federal Reserve Expectations - Following recent inflation reports, the probability of a 25-basis point rate cut has reached 96%, with a small 4% chance for a half-point cut. This indicates a strong expectation for a rate cut [3] - A quarter-point cut is likely already priced into equities, suggesting that investors should pay close attention to Fed Chair Powell's comments rather than just the cut size [3] Government Shutdown Concerns - There is a rising risk of a government shutdown, with prediction markets indicating a 55% chance. This is notable given the upcoming midterm elections and increasing job losses [4] IPO Market Activity - Recent IPOs, including Klarna and Gemini Space Station, showed relative strength, indicating investor appetite for new assets. However, there are concerns about valuations becoming overextended [5] - Shares of Gemini are indicated to rise by nearly 5%, while Klarna is up just under 1% [5] Individual Stock Movements - Nvidia shares are down over 1% in premarket trading due to accusations from China regarding anti-monopoly law violations, which could impact trade negotiations [6] - Tesla stock is indicated to rise by almost 8% following Elon Musk's purchase of 2.5 million shares, valued at approximately $1 billion, signaling confidence in the company [8] Commodity and Currency Trends - The U.S. dollar is showing weakness, while gold has increased by 30% this year, raising questions about potential economic slowdown or inflation [9] - The weakening dollar may exacerbate inflation concerns if gold's rise is indicative of future economic conditions [9] Upcoming Market Events - This week features triple witching, where listed options, futures, and futures options will expire, potentially leading to increased market volatility [10]

Group 1 - The Federal Reserve is expected to make a decision on interest rates this week, with President Trump advocating for a significant cut, although market expectations do not align with this [1][2] - Recent economic indicators, such as the Empire Manufacturing report showing a significant loss, suggest a slowing economy, which may provide the Fed with justification for a rate cut [2][4] - Inflation remains a concern, with current rates at 2.9% for headline and 3.1% for core CPI, both significantly above the Fed's 2% target [4][6] Group 2 - The housing market is a focal point for the potential impact of rate cuts, with President Trump suggesting that a cut could alleviate housing issues, although the correlation is uncertain [5][6] - The long end of the yield curve, which influences mortgage rates, may not respond as expected if inflation continues to rise, potentially limiting the effectiveness of rate cuts on housing affordability [6][7] - If mortgage rates decrease due to lower long-term rates, it could lead to increased demand in the housing market, subsequently driving up house prices [7][8]

Summary of Key Points from the FOMC Preview Industry Overview - The document pertains to the North American economic outlook, specifically focusing on the Federal Open Market Committee (FOMC) and its monetary policy decisions. Core Insights and Arguments - **Rate Cut Expectations**: The FOMC is anticipated to implement a 25 basis point (bp) rate cut at the upcoming meeting, marking the beginning of a series of quarterly "insurance cuts" [5][9][30] - **Cautious Approach to Inflation**: Despite the expected rate cuts, core FOMC members are likely to adopt a cautious stance regarding inflation risks, indicating a gradual approach to easing [5][30] - **Economic Projections**: The median unemployment rate projection for 2025 is expected to remain at 4.5%, with GDP estimates showing a modest upward revision to 1.6% from 1.4% [11][25] - **Dissenting Opinions**: There are expected to be four dissents regarding the decision to cut rates, with some members advocating for a larger 50 bp cut due to recent labor market data [9][28][30] Important but Potentially Overlooked Details - **Labor Market Dynamics**: Despite a slowdown in the labor market, layoffs have remained low, and the unemployment rate has only gradually increased, suggesting that officials may not react strongly to weak non-farm payroll (NFP) data as long as unemployment remains contained [13][18] - **Inflation Risks**: The core Personal Consumption Expenditures (PCE) inflation forecast for 2025 is expected to hold steady at 3.1%, but there are concerns about persistent inflation pressures, particularly in labor-intensive services [19][27] - **Long-Term Projections**: The 2026 median dot is likely to decline to 3.375%, reflecting expectations for additional rate cuts in the following year [7][10] - **Market Reactions**: The markets have priced in aggressive easing in response to disappointing labor data, but the FOMC's cautious approach may temper expectations for rapid rate reductions [5][30] Conclusion - The FOMC's upcoming meeting is set against a backdrop of a slowing labor market and inflation concerns, leading to a cautious yet proactive monetary policy stance. The anticipated rate cut is seen as a necessary measure to manage economic risks while maintaining a focus on inflation and employment stability.

Market Overview - The market is currently experiencing a calm before a potential storm, balancing hopes for an imminent rate cut against ongoing geopolitical and economic uncertainties [1] - There is a growing confidence in the likelihood of the Federal Reserve easing monetary policies, with a 96% chance of a quarter-point rate cut anticipated [1][15] - The broader market remains upbeat, with the Nasdaq Composite gaining 2% last week and closing at a new all-time high above 22,000 [8] Company-Specific Developments - Nvidia's stock fell approximately 2.5% in pre-market trading due to a regulatory probe from China, which found the company potentially violating antitrust laws [2][9] - Tesla's stock showed strong performance in pre-market trading, gaining about 7.2% and priced around $420.56, reflecting positive investor sentiment ahead of upcoming developments [5][11] - Tesla's surge follows strong earnings reports and optimism regarding growth in electric vehicle sales and energy solutions [12] Economic Indicators - Treasury yields remain a key pressure point, with the 10-year yield holding near recent highs, while oil prices have climbed back above $71 per barrel [6] - The U.S. dollar has strengthened against major currencies, raising concerns for multinational earnings in the coming months [6] - Inflation remains stubbornly near 3.1% year-over-year on core CPI, even as the labor market shows signs of weakness [19] Future Projections - Economists expect as many as six consecutive rate cuts stretching into 2026, potentially lowering policy rates to between 2.75% and 3% [17] - The immediate focus is on the Federal Reserve's decision, with investors seeking clarity on whether the rate cut will be a one-off or the beginning of a series of reductions [25]

Economic Data - The University of Michigan's preliminary U.S. consumer sentiment index fell to a 4-month low of 55.4 in September, below expectations of 58.2 [1] - Year-ahead inflation expectations remained unchanged at 4.8%, while 5-year implied inflation expectations increased to 3.9%, exceeding expectations of 3.4% [1] Stock Market Performance - Wall Street's major equity averages ended mixed, with Arista Networks (ANET) dropping over 8% due to unimpressive long-term projections [2] - Vaccine makers, including Moderna (MRNA) and BioNTech SE (BNTX), saw shares slide more than 7% following reports linking Covid shots to child deaths [2] - Warner Bros. Discovery (WBD) surged over 16% after news of a potential cash bid from Paramount Skydance [2] Upcoming Economic Reports - Investors are awaiting a retail sales report, which will provide insights into consumer spending [3][9] - Other significant data releases include U.S. Industrial Production, Manufacturing Production, and Initial Jobless Claims [9] Federal Reserve Actions - The Federal Reserve is expected to cut the Fed funds rate by 25 basis points to a range of 4.00% to 4.25% [7] - There is a possibility of a larger 50 basis point cut, with investors closely monitoring Chair Jerome Powell's remarks for future rate cut indications [7][8] Corporate Earnings - Notable companies such as FedEx (FDX), Lennar (LEN), and General Mills (GIS) are scheduled to release quarterly results this week [10] Trade Talks - U.S.-China trade talks began, focusing on trade, the economy, and TikTok's status, with expectations of nearing a deal [11] Bond Market - The yield on the benchmark 10-year U.S. Treasury note is at 4.064%, reflecting a 0.12% increase [12] European Market Insights - The Euro Stoxx 50 Index rose by 0.67%, with defense stocks outperforming amid ongoing geopolitical tensions [13] - Fitch Ratings downgraded France's sovereign credit rating to A+ from AA- due to political turmoil [13] Chinese Economic Data - China's August Industrial Production rose by 5.2% year-on-year, below expectations of 5.7% [16] - Retail Sales increased by 3.4% year-on-year, weaker than the expected 3.8% [16] - Fixed Asset Investment growth slowed to 0.5% year-on-year, below expectations of 1.5% [16]

Core Viewpoint - The U.S. Federal Reserve is expected to meet on September 16-17, with most analysts predicting a 25 basis point interest rate cut, but a surprise cut of 50 basis points could significantly impact the markets [2][3][15] Historical Context - Historical data shows that unexpected Fed rate cuts can lead to substantial market rallies, with a 50 basis point cut potentially boosting the market by 30% [3][9] - During the COVID-19 pandemic, the Fed's emergency cuts totaling 150 basis points led to a 115% rally in the S&P 500 from March 2020 to January 2022 [5][10] - The 2019 rate cut cycle, which included three unexpected 25 basis point cuts, resulted in a 45% gain in the S&P 500 over 14 months [6][9] Current Market Conditions - The S&P 500 is currently trading near all-time highs around 6,584, which is different from past rate-cut cycles that occurred during economic crises [7][16] - The market has already priced in a 25 basis point cut, making a larger cut a significant surprise [7][10] Political Influences - Political pressure from the Trump administration for deeper rate cuts may influence the Fed's decision and market reactions [8][10] Potential Outcomes - If the Fed cuts rates by 25 basis points, the market may see modest upside, but a dovish tone could signal more future cuts, which would be positive for markets [15] - A surprise cut of 50 basis points or more could lead to a significant short-term surge and a medium-term rally exceeding 30% [15][14] Valuation Considerations - The current P/E ratio of the S&P 500 is about 25x, higher than the 20x level during previous rate cut cycles, which limits further multiple expansion [16] - Unlike the emergency cuts of 2020, any current cuts would be preventive, suggesting less panic-driven upside potential [16]

Group 1 - Standard Chartered anticipates a 50 basis point interest rate cut by the US this week, initiating a rate-reduction cycle expected to last into next year, which is likely to enhance investor sentiment in Hong Kong and other markets [1][2] - Weak employment data, declining consumption, and lower inflation rates are expected to prompt the US Federal Reserve to implement its first rate cut of the year [2][5] - The Federal Reserve is projected to lower its key rate to a target range of 3.75% to 4% during the upcoming Federal Open Market Committee meeting, marking the first adjustment since December [3][5] Group 2 - The US is expected to continue reducing its key rate next year by an additional 75 basis points to a full percentage point, with the one-month Hong Kong interbank offered rate (Hibor) projected to decrease to around 2% to 2.5% [6] - A lower interest rate is anticipated to benefit investment markets and the overall economy in Hong Kong, with strong stock market turnover and active initial public offerings encouraging more investors [7] - Swiss private bank Lombard Odier forecasts that the US will cut interest rates six times from September through the end of 2026, which may lead to increased capital flows into emerging markets and benefit Chinese stocks and bonds [7]

Core Viewpoint - The upcoming interest rate decision by the U.S. Federal Reserve is critical for the long-term bullish trend of risk-on assets like Bitcoin, with current market conditions indicating a potential rate cut [1][2]. Interest Rate Decision - The interest rate decision on September 17 is significant as it coincides with the S&P 500 index, Bitcoin, and gold reaching near all-time highs [2]. - Core inflation is above 3.10%, and there is a weakening labor market, with a notable annual revision showing a drop of 911,000 from initial estimates [2]. Market Expectations - Current odds for a 25 basis point rate cut are approximately 94% according to CME's FedWatch tool, while prediction market Myriad indicates an 88% chance [3]. Short-term vs Long-term Impacts - Experts agree that a quarter-point rate cut would likely have a long-term bullish impact on risk-on assets, including Bitcoin, but the immediate market reaction will depend on comments made by Fed Chair Powell during the briefing [4]. - Analysts highlight the importance of the dot plot, suggesting that a rate cut without a significant downward revision could lead to a pullback in altcoins due to high open interest [5]. Speculative Activity - Anticipation of a rate cut has led to increased speculative activity, resulting in stretched valuations across various asset classes [6]. - A hawkish surprise from Powell could complicate the Fed's price stability mandate [6]. Bitcoin's Long-term Valuation - Historical data shows that Bitcoin's one-month returns post-rate cut are unpredictable, but three-month estimates indicate a bullish outcome 62% of the time with an average gain of 16.50% [7]. - HashKey Capital projects Bitcoin could reach $700,000 by the end of 2035, assuming a 10% CAGR in gold prices, suggesting a macro narrative of Bitcoin catching up with gold over the next decade [7].

The Federal Reserve is widely expected this week to make its first interest rate cut of 2025, but the bigger question for investors is how many more cuts could be on the way as the central bank contends with a weak job market, sticky inflation, and mounting White House pressure. One clue will come in the form of the Fed's "dot plot," a chart updated quarterly that shows each official's prediction about the direction of the central bank's benchmark interest rate. The last dot plot, released in June, revea ...

LIVE Dow Set to Open Up as Market Focuses on the Fed The Fed is widely expected to resume cutting interest rates, with markets pricing in a 25 basis-point rate reduction, LSEG data show. However, a larger 50 basis-point reduction looks unlikely and Danske Bank analysts said they expect "a more gradual rate-cutting cycle rather than back-to-back cuts." They cited Friday's University of Michigan's consumer confidence survey for September, which showed one- year inflation expectations remained elevated at 4.8% ...