Market Overview
Strong Expectations for a Rate Cut: Due to a weak job market and lower-than-expected inflation data, the market is pricing in a 98% probability of a Fed rate cut in October.
Asset Price Reaction: Boosted by this, the S&P 500 index hit 6,800 points, Bitcoin surpassed $110,000, and gold broke through $3,600 per ounce.
Asset Outlook
Gold: Rate cuts are positive for gold, and a 75 basis point rate cut for the full year is expected to provide approximately 9.6% of valuation support for gold.
S&P 500: Historical data shows that, in non-recessionary periods, the stock index has risen an average of 18% in the 12 months following a rate cut.
Bitcoin (BTC): Benefiting from loose monetary policy and institutional inflows, it has found support around $111,300.
Potential Risks
Pullback and Recession Risk: The market has fully priced in the expectation of a rate cut; be wary of a pullback caused by "selling the facts." If the economy heads towards recession, even interest rate cuts will struggle to stem the decline in risky assets. Historically, the S&P 500 index has fallen an average of 2.7% following rate cuts during recessions.
Policy uncertainty: Data delays due to a government shutdown, or a rebound in inflation caused by overly rapid rate cuts, could trigger market volatility. $BTC
