The Fed and Panic Optimism

The American financial community is divided into three camps regarding interest rate adjustments:

• No rate cuts in the current year.

• Rates will be cut, but not now (timing uncertain).

• A rate cut at the next meeting.

The most probable and reasonable scenario is a single rate cut before the end of 2025. All Fed members agree that the risks of higher inflation and labor market deterioration have diminished but remain significant.

The Fed anticipates higher real GDP growth in 2025 compared to previous forecasts and lower inflation relative to earlier projections.

Nothing new here—the market was already aware of this before the minutes were released.

However, speculators focused on the opinions of two Fed officials (known to be Waller and Bowman) who supported a rate cut as early as July. This fact changes little. According to CME data, the probability of maintaining current rates at the July 20 meeting stands at 95.3%.

It's important to note that market sentiment is often shaped by automated trading systems (algorithms), which interpreted the Fed minutes positively. Coupled with the postponement of tariff implementations to August 1, major and mid-sized capital concluded that there's sufficient market optimism for new purchases.

Adding fuel to the fire, Trump once again attacked Powell, demanding an immediate 3% rate cut.

Currently, the S&P 500 is eager to break through the 6,300 mark, with only about 0.6% remaining. Traders are reluctant to lock in profits on long positions and are seeking positivity in any information. In reality, the market simply needs a minor correction to alleviate overbought conditions and continue its long-term growth.

Let's act prudently and avoid unnecessary risks.

Profits to y’all!