JPMorgan Warns: Fed Rate Cut May Trigger Market Turmoil
JPMorgan's U.S. trading desk has cautioned clients that the widely anticipated Federal Reserve rate cut on September 17 could mark a near-term peak for risk assets rather than a new upward leg. This sentiment was highlighted in a note from desk head Andrew Tyler, stating, “We have concerns that the September 17 Fed meeting, which delivers a 25bp cut, could turn into a ‘Sell the News’ event as investors pull back to consider macro data, the Fed’s reaction function, potentially stretched positioning, a weaker corporate buyback bid, and waning retail investor participation.”
Key Points
- JPMorgan anticipates the Fed's rate cut may lead to a short-term peak in risk assets.
- Standard Chartered expects a 50-basis-point cut due to a rapidly cooling labor market.
- Gold prices have surged, reaching record highs above $3,600 per ounce.
- Bitcoin has rebounded to around $112,000 amid rate-cut expectations.
- Investors should monitor market reactions, particularly regarding volatility post-rate cut.
In-Depth Analysis
JPMorgan’s warning highlights the complexity of the current market environment. Weak employment data and rising unemployment rates have intensified market expectations for Fed policy easing while also raising concerns about economic growth slowdowns. According to Standard Chartered, U.S. nonfarm payrolls rose by only 22,000 in August, and the unemployment rate ticked up to 4.3%, leading to widespread expectations for a larger Fed rate cut.In this context, the surge in gold prices indicates that investors are seeking safe-haven assets, while Bitcoin, as a store of value, should theoretically benefit from lower interest rates. However, market responses may not be straightforward. JPMorgan points out that a potential “Sell the News” reaction following the rate cut could lead to short-term declines in Bitcoin and other high-risk assets, especially if the cut is smaller or perceived as “hawkish.”