Federal Reserve Delivers Bold 0.5% Interest Rate Cut, Signals Further Easing Ahead (UPDATED)
Portfolio Pulse from Piero Cingari
The Federal Reserve cut interest rates by 50 basis points, surprising analysts who expected a smaller cut. This move led to a decline in the U.S. dollar and a rise in gold prices, S&P 500, and small-cap stocks. The Fed's projections indicate further rate cuts in the coming years.
September 18, 2024 | 6:26 pm
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POSITIVE IMPACT
The SPDR Gold Trust hit all-time highs, rising 1% as investors flocked to gold following the Fed's rate cut.
Gold often benefits from lower interest rates as it becomes more attractive compared to yield-bearing assets. The Fed's aggressive cut boosted gold prices.
CONFIDENCE 90
IMPORTANCE 65
RELEVANCE 75
POSITIVE IMPACT
The iShares Russell 2000 ETF surged 1.5% as small-cap stocks rallied following the Fed's rate cut.
Small-cap stocks often benefit from lower interest rates due to their higher sensitivity to economic conditions. The Fed's aggressive cut spurred a strong rally in small caps.
CONFIDENCE 90
IMPORTANCE 75
RELEVANCE 85
POSITIVE IMPACT
The SPDR S&P 500 ETF Trust rose 0.4%, reaching record highs after the Fed's rate cut.
Lower interest rates generally support stock prices by reducing borrowing costs and increasing consumer spending. The Fed's unexpected cut boosted the S&P 500.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80
POSITIVE IMPACT
The iShares 20+ Year Treasury Bond ETF rose 0.2% as Treasury yields fell following the Fed's rate cut.
Lower interest rates typically lead to higher bond prices, benefiting TLT. The Fed's decision to cut rates more than expected supports this trend.
CONFIDENCE 85
IMPORTANCE 60
RELEVANCE 70
NEGATIVE IMPACT
The Invesco DB USD Index Bullish Fund ETF fell 0.3% following the Fed's unexpected 50bps rate cut, as the U.S. dollar weakened.
The rate cut led to a weaker dollar, directly impacting UUP, which tracks the dollar's performance. The unexpected size of the cut suggests further dollar weakness.
CONFIDENCE 90
IMPORTANCE 70
RELEVANCE 80