JPMorgan has weighed in on the probable market response, noting that historically, when the Fed has eased monetary policy with the S&P 500 hovering within 1% of its record high, equities have delivered an average 12-month return of 15%. However, research also reveals that short-term market performance is less predictable: stocks have finished lower in half of the cases in the month following such a rate cut.
JPMorgan analysts suggest that although there may be near-term volatility, history points to a buying opportunity for long-term investors after Wednesday’s anticipated rate reduction.
Goldman Sachs anticipates that the U.S. Federal Reserve will begin trimming interest rates, reducing the benchmark from its current level of 4.3% to 3.1% by the close of 2026, according to the firm’s base case. The investment bank forecasts three 25 basis-point rate cuts in 2025, scheduled for September, October, and December. This will be followed by two further cuts in March and June of 2026, with Goldman expecting the terminal rate to settle between 3.0% and 3.25%.
Meanwhile, economic data released yesterday indicate that U.S. retail sales remained robust in August, surpassing analyst projections and underscoring persistent household demand. Headline retail sales gained 0.6% month-over-month, well above the 0.2% forecast and matching July’s revised 0.5% increase. On a yearly basis, sales rose 0.6%, unchanged from the previous month and ahead of the prior reading of 0.5%.
Sales at gasoline stations edged up 0.5%, a deceleration from July’s 0.9% rise. Excluding gasoline, sales climbed 0.6%, maintaining the prior month’s pace, while sales excluding automobiles advanced 0.7%, outshining the 0.4% expected and improving on July’s 0.4% result.
