Stocks will now move based in part on the pace and size of potential rate cuts
For more than a year, the U.S. stock market went in mostly one direction, up, and in mostly one manner, quietly. A bonanza around artificial-intelligence technology helped drive Big Tech stocks higher, while other areas of the market held up amid rising hopes for coming cuts to interest rates by the Federal Reserve.
Some of the turbulence came on fears that profit reports for Big Tech stocks won’t be able to clear the immensely high expectations set for them after their prices surged so high. Instead of rising simply on hopes that the Fed will cut its main interest rate from the highest level in two decades, stocks will now move based in part on the pace and size of those potential cuts. The nearly unanimous expectation among traders is that the Fed will begin cutting in September.
Central banks around the world are also making moves, such as the Bank of Japan’s upward bias on rates while other central banks going the opposite way. That’s not to mention possible swings for the market that could arise because of the upcoming U.S. election.
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