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US stocks surged on hopes of 100 bps Fed rate cuts in CY25

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  ·          If Trump’ attempt to fire Fed Governor Cook succeeds, then Trump will have controlling power of the Fed board and influence to cut rates by 100 bps ·          Trump’ and his loyalists’ 24/7 reality shows indicate an intention to influence Fed policy and control Wall Street, but this may backfire ·          Trump’s tariff policy, secondary sanctions, and USD hegemony may result in US isolation rather than China ·          Wall Street may correct meaningfully in September as valuation is now in a bubble zone; stagflation may be looming Wall Street Futures and Gold got a boost after Fed ChairPowell indicated an imminent rate cut in September by 25 bps, which may be followed by another 25 bps in December, culminating in 50 bps in 2025 against 100 bps in 2024. But overall, Powell’s Jackson Hole speech on Aug...
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Fed may cut 50 bps in H2CY25, but may be on hold in 2026

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  ·          As per the Fed’s modified strategy document and Powell’s Jackson Hole speech, the Fed may now adopt flexible inflation and employment targets ·          In the longer run, the Fed will target 2.0% inflation and a below 4.0% (~3.5%) unemployment rate ·          But in the short/midterm, the Fed may target 2-3% core inflation and 3.5-4.5% or 4.0-5.0% unemployment rate as per underlying/evolving economic scenarios ·          Fed may keep 3.0% longer run terminal/neutral rate against 2.5% in the pre-COVID era ·          Fed may keep 1.00% real rate (3.0% terminal rate – 2.0% core CPI inflation) against 0.50% in the pre-COVID era ·          Fed may be anticipating 3.5% average core CPI inflation in 2026 from 3.0% in 2025 due to Trump’s po...
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