{"id":173682,"date":"2025-09-22T09:46:12","date_gmt":"2025-09-22T09:46:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/173682\/"},"modified":"2025-09-22T09:46:12","modified_gmt":"2025-09-22T09:46:12","slug":"wall-street-got-the-rate-cut-it-wanted-can-the-optimism-last","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/173682\/","title":{"rendered":"Wall Street got the rate cut it wanted. Can the optimism last?"},"content":{"rendered":"

Facebook<\/p>\n

Tweet<\/p>\n

<\/p>\n

Email
\n <\/a><\/p>\n

Link<\/p>\n

New York
\n \u00a0\u2014\u00a0<\/p>\n

\n The stock market is shrugging off worries about a weakening labor market and stubborn inflation, instead embracing a much-anticipated interest rate cut.\n <\/p>\n

\n That optimism still has room to run, analysts say, but stocks could hit a wall if worries about an economic slowdown and still-high prices begin to weigh on consumer spending or businesses\u2019 earnings.\n <\/p>\n

\n The Dow, S&P 500 and Nasdaq each hit back-to-back record highs last week after the Federal Reserve delivered its first rate cut<\/a> since December.\n <\/p>\n

\n The S&P 500 is up 13% this year, rising through tariff uncertainty and concerns about the Trump administration encroaching on the Federal Reserve\u2019s independence.\n <\/p>\n

\n Investors see more room for stocks to run despite the economy showing signs of frailty. While the Fed balances an increasingly complicated dynamic<\/a>, investors are cheering the prospect of a rate-cutting cycle \u2013 even as experts warn the market is increasingly divorced from economic reality.\n <\/p>\n

\n Concerns may be mounting about the emergence of a \u201cK-shaped economy<\/a>,\u201d but the stock market keeps rising as corporate America\u2019s profits keep beating Wall Street\u2019s expectations.\n <\/p>\n

\n About 81% of companies in the S&P 500 posted second quarter earnings-per-share results that beat Wall Street\u2019s expectations, according to FactSet data.\n <\/p>\n

\n Until there is evidence of a real hit to corporate profits, stocks will continue to grind higher, said Larry White, professor of economics at NYU Stern. The market is \u201cdownplaying the risk\u201d about the fractures in the economy, he added.\n <\/p>\n

\n \u201cEverybody I know is concerned, but we\u2019re not the markets,\u201d White said. \u201cAnd the markets are just clearly optimistic.\u201d\n <\/p>\n

\n Interest rate cuts can lower savings rates and borrowing costs, encouraging spending and investing, spurring business activity and creating a sustained tailwind for stocks.\n <\/p>\n

\n The Fed\u2019s dot plot \u2014 an indication of where committee members think futures rates will be \u2014 outlined expectations for two more rate cuts this year, which is in line with Wall Street\u2019s expectations.\n <\/p>\n

\n \u201cThe stock market bonanza shows no signs of fatigue after (the) Fed decision was accompanied by predictions of \u2026 more cuts by Christmas,\u201d Jos\u00e9 Torres, senior economist at Interactive Brokers, said in a Thursday note.\n <\/p>\n

\n The Russell 2000, an index of smaller companies that are more sensitive to interest rates, closed at its first record high since 2021 on Thursday. The Russell has soared 40% since its low point in April, entering a new bull market as small businesses embrace optimism about lower rates.\n <\/p>\n

\"A<\/p>\n

\n Seema Shah, chief global strategist at Principal Asset Management, said the outlook remains positive for stocks.\n <\/p>\n

\n \u201cThis is a decent backdrop for equities,\u201d Shah said. \u201cIt\u2019s not boom times, but ultimately, what we heard from the Fed is, \u2018Fine, the economy is slowing. There\u2019s a couple of labor market concerns growing,\u2019 but they\u2019re not overly worried.\u201d\n <\/p>\n

\n \u201cThere\u2019s some comfort and confidence that they can arrest the (labor market) slowdown before it gets away from them,\u201d Shah added. \u201cAnd the Fed cuts give a little bit of extra juice to the (stock) market.\u201d\n <\/p>\n

\n Since 1980, when the Fed has cut rates while the S&P 500 is trading near all-time highs, the index has risen across the next 12 months about 90% of the time, according to research from Keith Lerner, co-chief investment officer at Truist Advisory Services.\n <\/p>\n

\n \u201cCorporate profits continue to be the north star for the market and will be critical to monitor,\u201d Lerner said. \u201cFor now, the bull market continues to earn the benefit of the doubt.\u201d\n <\/p>\n

\n While stocks grind higher, uncertainty always lingers.\n <\/p>\n

\n Federal Reserve Chair Jerome Powell on Wednesday upheld the image of a united and data-dependent Fed, which helped give a boost of confidence to investors. Yet Powell highlighted concerns about sticky inflation and said there is \u201cno risk-free path\u201d ahead for the central bank.\n <\/p>\n

\"Federal<\/p>\n

\n Bank of America on Wednesday upgraded its forecast for the S&P 500\u2019s profitability growth this year. Still, strategists cited risks related to the impact of tariffs on inflation and the potential for consumer spending to slow down if the labor market deteriorates further.\n <\/p>\n

\n Companies have navigated Trump\u2019s tariffs \u201cwithout significant margin degradation so far, but the full impact may be yet to come,\u201d Savita Subramanian, equity strategist at Bank of America, said in a note.\n <\/p>\n

\n And while there is a tremendous amount of uncertainty about the path forward for the economy, stocks are trading at historically expensive valuations. In Bank of America\u2019s latest survey of global fund managers, a record 58% of respondents said global stock markets are \u201covervalued.\u201d\n <\/p>\n

\n \u201cThere is a disconnect between the market and the economy,\u201d said David Kelly, chief global strategist at JPMorgan Asset Management.\n <\/p>\n

\n \u201cWe\u2019re certainly overdue for a bit of a pullback. I think the rally could continue until the economy receives some genuine shock, but people need to be wary about valuations,\u201d Kelly said. \u201cWe can\u2019t time when this huge bull market will turn, but I do think for investors, it\u2019s long past time to think about rebalancing portfolios.\u201d\n <\/p>\n","protected":false},"excerpt":{"rendered":"Facebook Tweet Email Link New York \u00a0\u2014\u00a0 The stock market is shrugging off worries about a weakening labor…\n","protected":false},"author":2,"featured_media":173683,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[37],"tags":[28,112],"class_list":["post-173682","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-business","tag-markets"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/173682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=173682"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/173682\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/173683"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=173682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=173682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=173682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}