Markets Swing as Fed Walks Inflation-Growth Tightrope
The Fed's first rate cut in four years has markets seesawing between risk-on euphoria and lingering recession fears. While tech stocks celebrated easier policy, other assets flashed caution over potential missteps.
Gold's surge above $2,600 signaled doubts the Fed can achieve its "immaculate disinflation" without sparking an economic slump. Lower rates dim the dollar's appeal while fueling haven demand, with investors piling in to hedge policy turbulence risks.
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However, a full-blown risk-on revival could cap gold's upside if the Fed can truly burnish the outlook for future earnings.
Mixed signals kept recession risks alive even as equities hit new highs. Spiking Treasury yields suggested skepticism over a smooth glide to easier policy with inflation still elevated. FedEx's profit warning just days after Powell's upbeat message stoked hard landing fears.
Rate futures are already pricing in steeper cuts than guided, doubting the soft landing narrative. More policy shocks could pull markets back into volatile tightening territory.
For traders betting on a disruptive growth renaissance, the path to the promised land of lower peak rates hinges on the Fed defying the odds by traversing its precarious tightrope ahead.
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