Core Viewpoint - Investors are closely monitoring the Federal Reserve as it continues to cut interest rates to stimulate a slowing economy, leading to the lowest borrowing costs in nearly a decade, which has generated both optimism and anxiety on Wall Street [1] Short-Term Impact - Lower interest rates make borrowing cheaper, increasing demand and potentially leading to a short-term stock rally as companies expand or buy back shares and consumers spend more freely [4] - Investors typically shift funds from bonds to stocks when yields fall, making equities more attractive, which can fuel rallies in the tech and consumer sectors [5] Medium-Term Considerations - The implications of rate cuts depend on the underlying reasons; cuts due to easing inflation and stable growth are generally positive, while those aimed at combating slowing earnings or recession risks warrant caution [6] - Rate cuts following economic strength can extend bull markets, whereas those driven by distress may lead to volatility and declining earnings despite inflated share prices [6] Long-Term Risks - Persistent rate cuts can lead to significant issues, as prolonged cheap money can inflate valuations beyond fundamental justifications, potentially creating bubbles in various asset classes [7]