JPMorgan Issues Stark Warning: September 17 Fed Rate Cut Risks ‘Sell the News’ Stock Plunge

JPMorgan has issued a significant warning to investors ahead of the Federal Reserve’s anticipated interest rate decision on September 17. The banking giant cautions that while many expect a rate cut to fuel the ongoing stock market rally, the event could instead trigger a sharp ‘sell the news’ decline in stock prices.

According to Andrew Tyler, head of global market intelligence at JPMorgan, the market’s current bull run, which has seen the Dow Jones Industrial Average, Nasdaq Composite, and S&P 500 reach record highs, may be vulnerable. Tyler highlights concerns that a 25 basis point rate cut could prompt investors to pull back, re-evaluating macroeconomic data, the Fed’s reaction functions, potentially overstretched market positioning, a weakening corporate buyback trend, and reduced retail investor participation.

This comes despite recent market optimism, spurred by dovish signals from the Fed, including Chairman Jerome Powell’s Jackson Hole address on August 22, which led to increased bets on lower rates. However, JPMorgan’s analysis suggests that the overwhelmingly positive view of looser monetary policy may be flawed, with other experts like David Kelly, chief global strategist at JPMorgan Asset Management, also expressing skepticism about rate cuts being a panacea for economic challenges.

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