Core Viewpoint - The Federal Reserve's decision to cut interest rates by 25 basis points and end quantitative tightening reflects a proactive approach to address economic concerns, particularly in light of rising unemployment risks and easing inflation pressures [1][2]. Group 1: Federal Reserve Actions - The Federal Reserve announced a 25 basis point rate cut, bringing the benchmark rate to a range of 3.75%-4.0%, marking the second cut since resuming this policy in September [1]. - The Fed will end its quantitative tightening operations starting December 1, reducing its balance sheet from $8.9 trillion in June 2022 to $6.6 trillion by October 2023 [1]. - Market reactions were mixed, with major indices showing stability, while Powell's comments on future rate cuts led to a temporary market pullback [1][2]. Group 2: Economic Indicators - The Fed's rate cut is seen as a preventive measure due to a rapid decline in U.S. employment data and potential further deterioration in the labor market, alongside a temporary easing of inflation risks [2]. - Recent CPI inflation indicators for September were below expectations, contributing to the decision to lower rates [2]. - The Fed's dual mandate remains a focus, with Powell emphasizing the challenges posed by both employment and inflation risks [2]. Group 3: Market Implications - The end of quantitative tightening is expected to alleviate liquidity pressures in the market, which have been rising recently due to concerns over small banks' liquidity [3]. - The Fed's decision to halt balance sheet reduction may have limited overall impact, as the scale of asset reduction had already decreased significantly [4]. - Political factors are anticipated to increasingly influence Fed decisions, with upcoming personnel changes potentially affecting market expectations [5]. Group 4: Investment Environment - The current economic expansion and declining interest rates create a favorable environment for risk assets, particularly in technology, communication services, and financial sectors [5]. - Global liquidity improvements from Fed rate cuts may also support non-U.S. markets, with structural opportunities in A-shares, Hong Kong stocks, and Japanese markets being highlighted [5]. - Investors are advised to maintain a diversified asset portfolio to balance risks and returns, especially in light of recent volatility in the tech sector [6].