Rate cuts and stimulus bolster markets to new highs
In September 2024, financial markets responded positively to the U.S. Federal Reserve’s (Fed) unexpected 50 basis point rate cut and China’s ambitious stimulus package aimed at revitalizing its economy. The Fed’s decision signals a proactive approach to support growth amid easing inflation, potentially also boosting U.S. equities in the coming months. Meanwhile, China’s measures to lower reserve requirements and interest rates on mortgages are intended to stimulate consumer spending, creating a more favourable outlook for global markets despite ongoing inflation concerns.
The NEI perspective
The Fed surprised markets with a significant 50 basis point rate cut, citing concerns about weakness in the labour market. This decisive action signals confidence in inflation, which has eased to around 2.5%, to continue to moderate. Bottom line: Easing monetary policy, moderate economic growth, along with strong corporate earnings growth creates a positive environment for equities. Therefore, diversification and a high-quality focus are key.
Inflation continues to ease across the U.S., Canada and Europe, allowing for rate cuts and creating a favourable environment for equities. A recent update in the 2026 consensus estimates for corporate earnings also points to strong growth rates. Bottomline: We’re moderately bullish on equities as economic growth continues.
China announced a stimulus plan in a rare September meeting to address economic challenges, emphasizing the need for effective policies, increased fiscal spending, and aggressive interest rate cuts to achieve a 5% growth target. A proposed stimulus package worth at least 2 trillion yuan aims to stabilize the property market and support low-income groups.