Core Viewpoint - The Federal Open Market Committee (FOMC) is widely expected to lower interest rates by 25 basis points in its upcoming meeting, with a probability of 94% for a reduction to the 400-425 basis points range [1] Interest Rate Expectations - Market expectations indicate a 94% probability for a 25 basis point cut to the 400-425 range, while the probability for a 50 basis point cut to the 375-400 range is 6% [1] - There is no probability assigned for maintaining the current interest rate [1] Historical Context - The current interest rate hike cycle began in March 2022 and has lasted for 3 years and 6 months [1] - The last rate hike occurred in July 2023, bringing the rate to 5.25%-5.50% [1] - During this period, the Nasdaq Composite Index has increased by over 9,000 points, a rise of 70.04%, while the Dow Jones Industrial Average and S&P 500 Index have risen by 35.97% and 54.07%, respectively [1] Meeting Highlights - Key points of interest for the upcoming meeting include whether the FOMC will signal further rate cuts, with potential hints of three total cuts by 2025 [1] - The stance of dissenting members from the July meeting, specifically Michelle Bowman and Christopher Waller, will be observed to see if they will oppose the rate adjustments again [1] - The voting behavior of newly appointed Federal Reserve Governor Stephen Milan will be scrutinized to determine if he aligns with the consensus or advocates for more aggressive rate cuts as suggested by President Trump [1]

Core Viewpoint - The Federal Reserve is expected to cut interest rates by 25 basis points during its upcoming meeting, influenced by recent employment growth slowdown and a shift in focus towards employment issues rather than inflation concerns [1][2][8]. Group 1: Federal Reserve Meeting Insights - The Federal Reserve's decision to finalize the meeting's participant list just before the meeting is unprecedented, indicating potential internal conflicts among officials [2][4]. - The likelihood of a 25 basis point rate cut is approximately 96%, while a 50 basis point cut is at 4% according to the CME FedWatch Tool [6]. - Recent disappointing economic data has heightened concerns about a slowdown in the labor market, which could impact consumer spending and economic growth [8]. Group 2: Internal Conflicts and Predictions - The internal division within the Federal Reserve may be more pronounced than in previous meetings, with some officials advocating for a larger rate cut while others prefer to maintain current rates [11][12]. - The addition of Milan to the Federal Reserve is expected to strengthen the faction supporting more aggressive rate cuts, while the hawkish side remains significant [12]. Group 3: Dot Plot and Future Rate Cuts - The dot plot will be closely watched for indications of future rate cuts, particularly regarding the number of cuts expected in 2025 and the potential for increased divergence in 2026 predictions [13][14]. - Analysts predict that the dot plot will show two rate cuts for the year, with the possibility of an adjustment based on internal disagreements [17][20]. Group 4: Market Reactions and Sector Performance - Historical data suggests that the S&P 500 typically shows positive returns in the 12 to 24 months following the Federal Reserve's first or resumed rate cuts [22][23]. - In periods of strong economic performance with limited rate cuts, cyclical sectors like financials and industrials tend to outperform, while defensive sectors gain traction during more aggressive rate cuts [26][30]. - Gold prices historically rise when the Federal Reserve cuts rates amid high inflation, with predictions suggesting gold could reach $4,000 per ounce by 2026 [26].