On Thursday, U.S. Eastern Time, U.S. stocks opened higher and closed higher, with the three major indexes collectively closing higher, and the crypto market also saw a general rise. The day before, the Federal Reserve cut interest rates by 50 basis points and described the rate cut as a "recalibration" of its monetary policy, rekindling hopes that the United States will be able to avoid a recession.
The positive effect of interest rate cut was delayed, and US stocks, cryptocurrencies, gold and crude oil rose across the board
On Thursday, the U.S. stock market opened higher and closed higher. The three major indexes closed higher. The Dow Jones Industrial Average rose by 1.26%, breaking through the 42,000 mark for the first time. The S&P 500 also rose by 1.70%, setting a record high. The Nasdaq rose by 2.51%. The crypto market followed the general rise of the U.S. stock market. As of press time, Bitcoin rose by 2.03% and Ethereum rose by 2.63%. In terms of the U.S. dollar index, investors began to consider more interest rate cuts from the Federal Reserve. The U.S. dollar index rose first and then fell, and finally closed down by 0.3%. Stimulated by the weakening of the U.S. dollar and geopolitical tensions, gold closed up by $27.31, an increase of 1.07%; WTI crude oil closed up 2.85%.
Recession fears ease
The Federal Reserve cut interest rates by 50 basis points on Wednesday and expressed greater confidence in achieving its inflation target. Powell mentioned the word "recalibration" several times in his speech that day and successfully conveyed to investors a reasonable view that this sharp rate cut was a mid-cycle adjustment rather than a precursor to a recession. Powell claimed that the US economy is still strong and there is no sign of recession.
Despite some volatility following the Fed's rate cut, the decision to cut by 50 basis points was welcomed by investors. The move was seen as a bold but necessary one. Some analysts said Powell's performance at the press conference was reassuring, which boosted hopes that the Fed can successfully reduce inflation to its 2% target while avoiding a recession. As a result, the market reacted positively today and the market's bullish trend remained intact, without triggering panic signals similar to the 2008 financial crisis.
How to configure assets next?
Since the global financial crisis, the Fed has undoubtedly been a "steadfast ally" of long investors, stabilizing financial market volatility through its messaging and driving asset prices further up. Historically, when the Fed cuts interest rates and the U.S. economy is not in recession, the stock market usually performs well. Data shows that over the past few decades, in non-recessionary periods, the S&P 500 index has risen an average of 14% within six months of entering a rate cut cycle.
However, some analysts believe that the current economy is relatively weak and is less sensitive to interest rate changes than before. Before the expected interest rate cut, the stock market had already risen significantly. Therefore, without worse economic news, there is limited room for further increases in the stock market.
This rate cut and the market reaction it triggered once again demonstrated the complexity and unpredictability of the market. Although macroeconomic data and policy expectations play a key role in market trends, investor behavior, market sentiment and external uncertainties also have an important impact on market fluctuations. Therefore, investors need to be cautious in their response and diversify their risks through diversified investment strategies. For example, investors can diversify their allocations through a one-stop integrated trading platform such as eeee.com, covering assets of different risk levels such as US stocks, indices, foreign exchange, commodities and gold.
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