The initial 25bp cut is largely priced in, so the equity reaction hinges on Powell’s tone. If he signals confidence in disinflation and no urgency for further cuts, markets may extend the rally, led by rate-sensitive sectors and high-quality tech. If he hints at data-dependence and a slower path, gains may be modest, since investors have already repositioned aggressively.
For 2026, the key is not the number of cuts but the reason behind them. A growth-friendly cutting cycle supports higher valuations through cheaper financing and sustained earnings. A risk-off cutting cycle triggered by weakening labour markets would cap upside and raise volatility. Given current trends, the base case remains a controlled easing path aligned with soft-landing expectations, which is favourable for equities though with more selective leadership.
In short, the market can rise after this cut, but the trajectory will depend more on forward guidance than the cut itself.
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