The Fed Preview: Expect A 25 bps Cut And Negative Stock Market Reaction

Summary

• The Federal Reserve is likely to cut rates by 25 bps at the September FOMC meeting, despite the need to cut by 50 bps to prevent a recession.
• The Fed is limited in cutting interest rates more aggressively due to a borderline high level of 10Y breakeven inflation expectations.
• Thus, the stock market is likely facing a recession and a recessionary bear market with a bubble burst, given the current valuations.

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