"The optimism is being driven by baked-in expectations that the U.S. Federal Reserve will deliver a 0.25% interest rate cut tomorrow. The cliché here is that the markets appear to have bought on the rumour of the cut, and once Chairman Jerome Powell delivers it, will lock in those profits by selling on the news. CME's Fed Funds futures market-usually an accurate predictor- says there is a 96.1% chance of the Fed delivering a 25bps cut to the 4% level on Wednesday."
"Goldman Sachs called this "peak Goldilocks" for stocks in a note to clients this morning. "Markets continued a broad 'risk-on' shift last week, boosted by the rally in Oracle following their bullish cloud revenue revisions, which supported the broader AI space. US inflation data was broadly in-line with expectations with a modest uptick in initial jobless claims, further supporting the Goldilocks backdrop, where a weak US labour market and anchored inflation allow for Fed easing," the bank's Christian Mueller-Glissmann and team wrote."
The S&P 500 reached a record high at 6,615.28 with futures rising ahead of a widely anticipated 25 basis-point Federal Reserve cut. Fed Funds futures imply a 96.1% probability of a cut to 4%, and traders may sell into the event to lock in profits. The Federal Reserve is expected to opt for a 25bps cut rather than 50bps to preserve future easing capacity. Goldman Sachs labeled the environment 'peak Goldilocks' as weak labor-market signals and anchored inflation support further easing. The upcoming meeting is tense amid political accusations against two FOMC members and the presence of Stephen Miran, prompting investor vigilance over Powell's communications.
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