With interest rate cuts expected next Thursday, how are institutions predicting the market trajectory post-rate cut?
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With interest rate cuts expected next Thursday, how are institutions predicting the market trajectory post-rate cut?
Institutions generally expect a 25-basis-point rate cut in September, under which scenario they tend to be moderately bullish. If the rate cut reaches 50 basis points, all turn bearish on the economy.
Navigating Web3 tides with focused insightsBy Nan Zhi, Odaily Planet Daily
The Federal Reserve's interest rate decision will be announced on September 19 (next Thursday) at 02:00. A rate cut is all but certain, but the magnitude of the September cut remains uncertain. Currently, markets widely believe that a 50-basis-point cut would signal heightened risk of economic recession. How do institutions view the likely size of the September rate cut, and what are their forecasts for market performance afterward? Odaily provides a comprehensive summary below.
How Large Will the September Cut Be? How Many Cuts This Year?
Reuters Survey: 91% of Economists Expect a 25-Basis-Point Cut, Three Rate Cuts in Total This Year
A Reuters survey shows that most economists expect the Fed to cut rates by 25 basis points at each of its three remaining policy meetings in 2024. Among 101 surveyed economists, only nine anticipate a 50-basis-point cut next week.
Stephen Stanley, chief U.S. economist at Santander Bank, said: "The employment report was weak but not disastrous. Last Friday, neither Williams nor Waller offered clear guidance on whether a 25- or 50-basis-point cut was more appropriate on September 18, but both delivered relatively benign assessments of the economy, which in my view strongly points toward a 25-basis-point cut."
Of the 95 economists surveyed, 65 believe the Fed will deliver two further 25-basis-point cuts in November and December after next week’s meeting—up from 55 out of 101 economists who held this view last month.
"Fed Whisperer": Leaning Toward Starting with 25 Basis Points
Nick Timiraos, known as the "Fed whisperer," commented on Waller's speech, noting she didn’t explicitly mention “25” or “50” basis points. However, her remarks leaned toward supporting a 25-basis-point initial cut while clearly preserving the option to accelerate easing "as appropriate" if "new data" show further deterioration.
SMBC: 50 Basis Points Possible
Hirofumi Suzuki, chief FX strategist at SMBC Nikko Securities in Tokyo, said that the slightly weaker-than-expected U.S. jobs report alone won't push the Fed to cut by 50 basis points in September. However, combined with prior revisions, the result leaves open the possibility of a 50-basis-point cut, depending on indicators beyond next month.
Nomura Securities: Three Rate Cuts Expected This Year
Andrzej Szczepaniak, economist at Nomura Securities, said: "Because the Fed chose to wait, it may now need to cut more sharply. But the U.S. macroeconomic outlook remains fairly resilient. Everything now hinges on the labor market."
Szczepaniak forecasts the European Central Bank will cut rates again this month and once more before year-end. He believes the Fed could also act three times this year, warning that markets may be overly optimistic in expecting the Fed to do more than the ECB.
The impact on equities appears more tied to when expectations for rate cuts solidify, rather than when cuts actually occur—suggesting the Fed’s positive effect on stock markets may already be priced in.
Saxo Markets: 25 Basis Points; 50 Could Trigger Panic
Charu Chanana, global market strategist and head of FX strategy at Saxo Markets, said overall global data send a clear message: the world is entering an economic slowdown.
Chanana stated: "My inclination is for a 25-basis-point cut—there’s no reason to panic. If the Fed immediately cuts by 50 basis points, it might trigger some panic. I think they’ll use very dovish language and leave room to cut 50 basis points in November or December if needed. A 25-basis-point cut coupled with strongly dovish commentary can compensate for not cutting 50 basis points now."
How Institutions View Post-Cut Market Trends
Bitwise: Markets Will Rally Once Uncertainty Clears
Matt Hougan, Chief Investment Officer at Bitwise, expects a significant rally in cryptocurrencies once current macroeconomic uncertainty begins to dissipate in October and November. "Markets hate uncertainty, and there’s a lot of it right now," he said.
While markets broadly expect Fed rate cuts, the likelihood of a 50-basis-point cut in September has declined. However, with CPI data due Wednesday and the Fed’s key meeting next week, the probability of more than 125 basis points in total cuts by December is rising.
BlackRock: A 50-Basis-Point Cut Could Signal Trouble
Jeffrey Rosenberg, senior portfolio manager at BlackRock, warned that a 50-basis-point easing move this month could signal deep concern about the economy—not reassurance that policymakers are acting promptly to avoid recession.
10x Research: A 50-Basis-Point Cut Could Signal Trouble × 2
10x Research said that if the Fed cuts rates by 50 basis points on September 18, the so-called bullish liquidity-easing cycle could backfire, negatively impacting risk assets including cryptocurrencies.
A 50-basis-point cut next week could indicate escalating economic concerns or that the Fed is falling behind the curve in addressing an impending slowdown, prompting investors to reduce exposure to risk assets like BTC and equities.
MN Trading: Bitcoin Is Undervalued; Recession Could Fuel Bull Run
Michaël van de Poppe, founder of MN Trading, posted on X saying he does not expect a major crash in BTC in 2024.
We’re actually on the edge of the "final" leg of a stock market bull run—the S&P 500 is far more likely to experience a major crash, which could drag Bitcoin down with it.
But Bitcoin’s valuation relative to the S&P 500 suggests the market may be replicating the 2019–2020 bull cycle. We’re currently 35% below our historical high relative to the S&P index. This implies Bitcoin will rise into March–April 2025, followed by a period of consolidation/adjustment, then another upward leg into 2026, peaking at some point that year—depending on liquidity and macro competition at that time. Given the impact of ETFs, I also believe prices will exceed everyone’s expectations.
Economic recession or weakness could become a catalyst for the bull cycle, as investors may seek alternative financial systems.
BCA: History Shows Rate Cuts Often Precede Recession
Peter Berezin, chief global strategist at BCA Research, recently wrote that investors should prepare for a potential U.S. recession, as the Fed may not be able to save the economy—and investment strategies should adapt accordingly.
In the past, recessions followed within months after central banks began cutting rates—in January 2001 and September 2007. Even if the Fed delivers more easing than currently priced in, the effects will lag.
If the Fed fails to prevent recession, the S&P 500 is expected to fall sharply, along with its price-to-earnings ratio. To hedge against recession, investors are advised to buy bonds.
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