The US Federal Reserve has decreased to reduce the ratio of federal funds in September, November, November and December, a total of 100 main points. When the Central Bank’s Consumer Price Index (CPI) is trying to get four decades of high decade in size (CPI) size, he canceled some of the aggressive growth.
The CPI continues to reduce the Fed in the 2% annual goal, and the US economy is expected to reduce several rates this year because it faces an important uncertainty in front of global trading tension.
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According to CME GroupThe percentage of the Central Bank can be four cuts before the Fedwatch, which calculates the probability of potential decisions based on the futures market. Will have a significant effect for this S & P 500 (SNPINDEX: ^ GSPC) index but not the way you expect.
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In March, CPI Since 2021, the slowest pace, the slowest pace increased by 2.4% per annum. A 2% of the FED of the FED would be thrown from the target of inflation, the further increase the way to reduce increased interest.
However, on April 2, President Donald Trump announced his plans to apply tariff He threw a huge key to work in all imported goods from America’s trade partners.
Trump has applied 10% of the import from each country, adding a 90-day break from many Chinese imports, which is more than 245% of Chinese imports, which are large trade imbalances.
Tariffs can increase the price of goods for consumers, so the Fed Police will be able to make sure that interest rate cuts are correct before the next few months in the coming months.
At the same time, tariffs can slow down economic activity, which can be a reason to reduce prices, even if inflation remains glue. According to Reuters, the seven top wall street banks, especially due to tariffs, raised the chances of a decline in the United States.
Golden man sachs In the next 12 months (over 35% of the tariffs) believes that a recession has 45% chance and JPMORGAN CHASE places the probability of 60% (previously over 40%).
As a result, some Wall Street banks reduced 2025 forecast for the ratio of federal funds by reducing more proportions than expected by the end of the year. According to the CME Group’s Fedwatch, the central banking interest may cut the percentage of 25 key points: June, September and December once in political meetings.
Interest rates are generally good for the corporate sector, because the growth of companies for fueling more money for fuel, reduces the expenses of profit which can increase. Moreover, low prices encourage investors to move away from riskless assets from risk-free assets, and the market can drive higher in favor of growth assets such as shares.
However, since the beginning of the 2000s, each rate has no difference in the beginning of the currency and this time this time. S & P 500, despite the use of three ratios at the end of 2024 at the moment, recently 12% low:
Testing the global trading tension (and the potential for weakening the economy) is the main reason for the last year’s interest rate, but the last decline in S & P 500. But the time is undoubtedly interested because the economy provides for first-degree cuts when the economy shows signs of vulnerability and the above table power Become a good predictor of a temporary exchange.
Moreover, the Fed, the party has a documentary history. The following table shows how many recessions (represented by gray shaded areas) show that the Fedin often increases large amounts of balance or reducing large amounts of balance or to reduce them in the face of economic weakness.
The last month in S & P 500 turns into the market, which transformed into the market can be marketed or causes hinging for economic information in the next few months. If the US economy slides in the technical recession – two quarters of two quarters decreased – investors are probably likely to be assumed.
Simply, the long-term performance of the stock exchange is managed by corporate earnings, and the companies make less money during recessions due to higher unemployment and less consumer expenses, thus sending stock prices.
Additional interest rates reductions should help attract any potential reduction and can start receiving even longer term investors because the stock market is a machine-looking machine. After all this, despite the global financial crisis and the coviet pandemic in the last 25 years, S & P 500, still reached a new record.
This time, it will probably not be different, especially in several countries, several countries are already negotiating with the Trump Administration. As a result, another weakness in the stock market can still prove that there is a long-term purchase.
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JPMorgan Chase, Motley is an advertising partner of stupid money. Anthony di Pisio There is no position in any of the marked shares. Motley Foox has positions and recommends Goldman Sachs Group and JPMorgan Chase. Motley recommends stupid CME group. Motley Fool has a Disclosure Policy.
