Powell Scares the Markets, but No One Believes Him Anymore

SP500

Key zone: 6,800 - 6,900

Buy: 6,950 (on strong positive fundamentals); target 7,100; StopLoss 6,880

Sell: 6,800(on a pullback after retesting the 6,900 level); target 6,700-6,650; StopLoss 6,870

Despite a deep split in voting opinions, the Federal Reserve again cut rates by 0.25%. For now, the market reacted moderately positive: S&P 500 +0.7%, Nasdaq +0.3%, and the Dow almost +500 points — though it’s worth noting the indices were already near all-time highs. Asian markets traded mixed: the Nikkei hovered near zero, pressured by individual corporate stories (declines in some tech stocks) and a stronger yen driven by a weakening dollar.

This means much of the effect of the rate decision was priced in long before the announcement, so the true impact of the Fed’s adjustment must be assessed only in the medium term.

For example, for the S&P 500 the base medium-term scenario is a continuation of the bullish trend or consolidation near highs, staying within +5–10% of peak prices — but only if unemployment does not rise sharply and inflation continues its moderate decline.

The negative scenario: if labor-market data deteriorate sharply, earnings expectations may be revised downward, and valuation multiple compression may trigger a correction even under lower interest rates. In that case, markets may face a real decline — or at least a significant pullback.

The Nasdaq may also benefit from the rate cut but carries higher risks. Over the next 3–6 months, a calm bullish scenario is plausible, but the index will react violently to any inflation surprises.

Let’s identify stocks that might be attractive for medium-term positioning under US economic stress and the Fed’s attempt to soften monetary policy:

• Due to strong AI and cloud demand: Nvidia; Microsoft; Broadcom; Amazon; Alphabet; Advanced Micro Devices; Apple; Meta Platforms; Salesforce; Oracle.
• Companies sensitive to Treasury yields and lower rates: Netflix; Trade Desk; Spotify; Disney; T-Mobile; Warner Bros.
• Companies with stable margins, strong order books, and low leverage: Honeywell; Caterpillar; John Deere; GE Aerospace; Lockheed Martin; UPS; 3M.
• Financial sector beneficiaries: JPMorgan; Bank of America; Goldman Sachs; Morgan Stanley; Wells Fargo; Citigroup; Berkshire Hathaway.

This market is not a classic “everything rallies” environment typical at the early phase of aggressive monetary easing. Key metrics for continuous monitoring include: NFP, unemployment rate, JOLTS, ISM services/manufacturing, the 10Y UST yield and the 2Y–10Y spread.

Remember: the market is selective, and profits accrue only to those segments whose business models benefit from lower rates without requiring a rapid acceleration in economic growth.

So we act wisely and avoid unnecessary risks.

Profits to y’all!