The Federal Reserve poured a bucket of cold water on the market this Wednesday, and Wall Street's dream of interest rate cuts seems to have shattered.
Interest rate cuts can not only promote spending, investment and recruitment, but also make risky assets such as stocks more attractive by reducing the yield of safe assets such as US treasury bond bonds.
Although the "three consecutive interest rate cuts" have arrived as scheduled, the latest forecast from Federal Reserve officials is that they will only cut interest rates twice next year, lower than the previously expected four times. This indicates that the path of the Federal Reserve's "hawkish interest rate cuts" may begin here, and the US stock market fell sharply in response, with all three major indexes falling more than 2.5% on Wednesday.
Wall Street analysts do not seem too concerned about this and believe that Wednesday's sell-off is an opportunity to buy on dips, and a strong reaction to the Federal Reserve meeting is unlikely to disrupt this year's Santa Claus rally.
Here are some specific viewpoints from investors and analysts:
Renowned American economist and President of Rosenberg Research, David Rosenberg
This is a Federal Reserve that never believes in its own views at any time. It is willing to respond passively rather than take the initiative, despite the long lag in the impact of its actions on the economy.
You may think that from the changes in comments and forecasts, the world has undergone significant changes since the sharp interest rate cut three months ago. But obviously, it doesn't take much to make this Federal Reserve change its mind. I can guarantee that it will change again.
Andrew Hollenhorst, Chief US Economist at Citigroup
Once there are signs of weakness in the job market, the hawkish policy tone of the Federal Reserve may not last and instead shift towards dovish.
In the coming months, the continued weakness in the job market may become more apparent, causing the Federal Reserve to cut interest rates faster than market expectations. We expect Powell and the committee to shift significantly towards a dovish stance in the coming months.
Dan Ives, a renowned analyst at Wedbush, a US investment bank
The interest rate path of the Federal Reserve will not become a driving force for technology stocks in the coming years.
Ultimately, this will not affect the bullish background of economic soft landing and risk assets.
Investors should focus their attention on the two biggest catalysts for the technology industry in 2025: the continued development and adoption of artificial intelligence, and a more favorable regulatory environment that will pave the way for more mergers and acquisitions.
Carol Schleif, Chief Investment Officer of the Montreal Bank Family Office
Investors overreacted because they knew before the meeting that the Federal Reserve might signal a pause in interest rate cuts.
The most important thing is that the economy remains strong.
The market seems to have overlooked the frequency and manner in which Chairman Powell pointed out how strong the economy is. There is a good reason for the Federal Reserve to slow down the pace of interest rate cuts, which is that the economy is strong, and a strong economy is ultimately the most important for the stock market and corporate profits.
Matt Britzman, Senior Stock Analyst at Hargreaves Lansdown
After experiencing the wonderful market since the US election, investors should see this as a healthy time for profit taking, rather than the end of the frenzy.
Jamie Cox, Managing Partner of Harris Financial Group
The market has a very bad habit of overreacting to the policy actions of the Federal Reserve. The Federal Reserve has not done or said anything that deviates from market expectations.
The good news is that the recent sell-off should pave the way for next week's Christmas rebound.
Jochen Stanzl, Chief Market Analyst at CMC Markets
The news released by the Federal Reserve last night while cutting interest rates was a good show for the stock market.
The Federal Reserve is sending a clear signal that it has almost completed the phase of interest rate cuts. 2025 will be an important turning point in the Federal Reserve's interest rate cut cycle. But if inflation data continues to rise in January and February, it may be time to cut interest rates again.
Jean Boivin, Director of BlackRock Investment Research Institute
The Federal Reserve has poured cold water on the market's hope for a significant interest rate cut by 2025.
Considering the potential risk of rising inflation caused by trade tariffs and the pressure on the labor market from slowing immigration, it is reasonable to expect only two more interest rate cuts in 2025.
We anticipated the outcome of this policy, so it will not change our recent views on the US stock market. The US stock market can still benefit from artificial intelligence and other powerful forces, strong economic growth, and widespread profit growth. We believe that by 2025, the performance of the US stock market will surpass that of its international peers.