Wall Street believes that the Fed will cut the rates since the labor market remains weakened and inflation did not get out of control.
Wall Street is betting strongly on risky assetsfrom small capitalization and emerging market actions to cryptocurrencies and speculative debt, encouraged by the expectation that the Federal Reserve (Fed) Reduce interest rates To sustain an economy that, despite Donald Trump’s commercial tensions, was resilient, as the latest inflation data exposed.
Optimism relies on data that shows a Weakened labor market and one Inflation in line with the expectedwhich would give the Fed margin for a cut at its next meeting.
Wall Street discounts feat cuts
Rates swaps discount a Probability close to 90% of a decline in a quarterfinal in Septemberand even some operators anticipate larger adjustments. The Treasury Secretary, Scott Besent, came to raise accumulated reductions between 150 and 175 basic points.
Since Trump announced his tariff agenda in April, The S&P 500 rebounded almost 30%while the Russell 2000 chains its fourth consecutive month of increases.
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For Guy MillerZurich Insurance Chief Strata, The US market charged an impulse that reduces interest in diversifying outside the USwith great capitalization technology as the main motor: in the second quarter, they contributed 90% of the growth of s&p 500 profits, according to Deutsche Bank.
Trust is reflected in the fall in volatility indicators. The VX for shares and the Move for bonds are at a minimum of several months, and the currency fluctuations index at its lowest level in a year. The appetite for high -risk bonds, such as Europeans, also grows.
The actions register maximums after inflation data
Although some managers warn about latent risks, including the lagging impact of tariffs, they consider that The market still did not enter into irrational land. “Right now, being bassist is very expensive,” he said Bernard Ahkongby UBS O’Connor.
According to Wall Street analysts, Trying to anticipate correction would be premature. However, factors such as a rebound in long -term yields or new political surprises could stop the rally.
In any case, for now, the predominant narrative is that the cuts of fees and the solid performance of large technological ones will continue to support the appetite for risk.
Source: Ambito
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