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Market Priced In Fed Rate Cuts, Setting Up Potential Sell-Off?

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Federal Reserve,Interest Rates,Market Expectations

The market anticipates upcoming Federal Reserve interest rate cuts, potentially leading to a 'sell the news' event if expectations are not met. Investors are closely watching price action in different asset classes for clues about the future.

The market has now potentially priced in all the rate cuts the Federal Reserve could issue, creating massive downside potential.

Money and financial markets tend to operate on a forward-looking basis, often shifting by 6-12 months ahead. Most of the mega investors in the market today, from Warren Buffett to Michael Burry and Stanley Druckenmiller, have attributed some of their success to the ability to imagine the world shortly and then figure out which companies will do well in that version of the future.

This uncertainty could create some volatility in the coming days, though the CME's FedWatch tool has now calculated the odds between the Fed's two choices. There is now a 61% chance of a 50bps rate cut and a 39% chance of a 25bps cut. Hecla Mining stock now trades at a new 52-week high, while Occidental Petroleum stock trades at a much lower 72% of its 52-week high. This price action shows both the expectation of a bear market in the coming months as well as a further flight to safety.After NVIDIA stock released its latest quarterly earnings results, the stock sold off from its high to 83% of its 52-week high.

 

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