JPMorgan warns that expected rate cuts may not significantly boost stock markets: “The Fed will begin to ease monetary policy, but in a more reactive manner”

JPMorgan has issued a cautionary note suggesting that these cuts may not significantly benefit the stock market, ahead of expected rate cuts by the Federal Reserve.

What happened:JPMorgan has warned that the Federal Reserve's planned rate cuts may not significantly boost stock markets. The firm suggests that the cuts will be a reaction to slowing economic growth, which could reduce their positive impact on stocks. reported Business information.

In a recent research note, JPMorgan strategists, led by Mislav MatejkaThe Fed said the rate cuts might not be enough to spur a fresh surge in the stock market. “The Fed will start to ease rates, but more reactively and in response to weakening growth; this might not be enough to spur a fresh surge,” they wrote.

The firm's outlook contrasts with the more optimistic forecasts of other analysts. For example, a Wells Fargo One analyst recently forecast a major rally in stocks once the Fed eases policy. Likewise, veteran strategist Jim Paulson suggested the Fed's shift could mark the beginning of a “new bull market.”

Chairman of the Federal Reserve Jerome Powell Last month at the Jackson Hole Symposium, the Federal Reserve indicated that interest rate cuts are likely. The next important indicator for the Fed will be Friday's nonfarm payrolls report, which will influence the 25-basis-point rate cut expected at the late September policy meeting, according to the report.

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Why is it important?The potential impact of the Federal Reserve's rate cuts has been a topic of significant debate among economists and market analysts. In late August, economists noted that inflation was “getting boring again” as numbers fell in line with targets, suggesting a resilient economy.

Earlier this month, however, some pundits poured cold water on the idea of ​​a September rate cut, arguing that sustained economic weakness was needed before any cuts could be justified.

To increase the complexity, Garry EvansChief Global Asset Allocation Strategist at BCA Research warned of an impending US recession, suggesting that rate cuts may not be enough to prevent an economic slowdown.

In addition, potential supply-side shocks could prompt the Federal Reserve to pause its rate cuts, according to Brian JacobsenChief Economist of Annex Asset Management.

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This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote