Fynsa
This year has been one of a long wait to finally see the Federal Reserve (FED) cut rates, materializing on our September 18, with nothing less than a 50 bp adjustment.
In a good way, it surprised the market by going from a mode of maximum caution, to leaving a taste of "we are taking longer than expected", cutting 50 bps and leaving the market, after the statements and declarations of FED participants, with cuts of 75 additional bps for the rest of the year, with an implicit new decrease of 50 bps in its next meeting, and then moving on to cuts of 25 bps per month.As long as the Fed maintains this dovishthe markets should continue to celebrate.
The main news this week has been China's stimulus, seeing -since Monday- a new round of monetary stimulus, some historic in terms of aggressiveness in rate cuts, but with market sentiment that did not seem in line with these moves.
Not only were these monetary stimuli expected, but also a fiscal commitment, which finally arrived on Thursday, with proposals to boost the ailing real estate sector, as well as to strengthen banks' capital structures. This move is a new buying force for emerging markets across the board, with economies and commodities celebrating for this opportunity to see the emerging train start to push global growth again.
The above points are more than enough to augur a fairly good end to the year and -why not- expect a further expansion of multiples by 2025.
But, of course, all is not rosy. Geopolitical tensions in the Middle East remain high, so the risk of contagion is still present. On the other hand, the war between Russia and Ukraine continues to pose a risk with nuclear tensions, as was pointed out at the UN. Lastly, the closest, the elections in the United States, where the outcome could bring volatility to the markets towards the end of the year.
As long as tail risks remain subdued, markets should continue to celebrate heading into 2025, especially for risky assets.
