Key takeaways

• As expected, the FOMC voted at its September meeting to cut the federal funds target range by 0.25% to 4.00-4.25%, a first change after 9 months. Fed Chair Powell characterised it as a ‘risk- management cut’ as unemployment is still low and Fed forecasters may not have great confidence.
• We maintain our view of only two more 0.25% cuts (in December and next March) through end-2026 due to the resilient US economy and still low unemployment. However, the recent deterioration in labour market data is a dovish risk to our view as we may see little more easing than our forecast. This risk is reflected in the Fed’s new projections, which now see two more cuts this year.
• With easing underway, resilient earnings in the face of tariffs, and upward earnings revisions, the prospects for S&P 500 corporate earnings suggest an acceleration over the next six quarters. Therefore, we maintain an overweight US equities stance. The tech revolution led by productivity-enhancing AI, nearshoring/onshoring and the reindustrialisation of the US continue to lift growth prospects and valuations. We also maintain an overweight on US IG credit and prefer medium-to-long duration Treasuries as growth moderates and the Fed eases gradually. We expect the USD to weaken further into year-end as Fed easing contrasts with G10 peers. Tariff/geopolitical risks remain a swing factor.

Please refer to the full report for details about the event and our investment view.

https://www.hsbc.com.my/wealth/insights/market-outlook/special-coverage/fomc-resumption-of-rate-cut-cycle-should-be-accretive-to-markets/