As we mentioned in yesterday's foresight, Federal Reserve Chairman Powell finally released the 'ultimate notice' of a rate cut in September at the July interest rate meeting, as expected by industry insiders, which also caused the entire American market to enter a frenzy overnight. On Wednesday, buy signals flashed everywhere on Wall Street...

According to industry data compiled overnight, the S&P 500 index rose strongly by 1.6%, the most bullish Fed interest rate day performance since July 2022. The NASDAQ 100 index also surged by 3% in a single day, the largest single-day increase since February. Seven of the 11 sectors in the S&P 500 index rose on Wednesday, with technology and non-essential consumer stocks leading the way. Healthcare, real estate, and essential consumer stocks performed relatively weakly.

The market for U.S. Treasury bonds and precious metals also saw a significant increase overnight.

Against the backdrop of soaring bond prices, the yields on US bonds of all maturities fell by double-digit basis points on Wednesday. At the close of the New York session, the 2-year US Treasury bond yield fell by 10.5 basis points to 4.264%, the 5-year US Treasury bond yield fell by 12.1 basis points to 3.918%, the 10-year US Treasury bond yield fell by 11 basis points to 4.034%, and the 30-year US Treasury bond yield fell by 9.2 basis points to 4.306%.

Driven by the expectation of a rate cut, the spot price of gold also rose by more than 1.2% overnight, closing at about $2,437.39 per ounce. In July as a whole, the price of gold rose by more than 4%, the largest single-month gain since March.

Many analysts believe that although Federal Reserve officials agreed unanimously on Wednesday to keep interest rates unchanged, this is likely to be their last 'wait-and-see' stance at the current high level in this interest rate cycle. In the Fed's monetary policy statement and Powell's news conference, the Fed has made sufficient preparations and clear signals for the next meeting to move towards a rate cut.

In retrospect, on the night of this interest rate meeting on Wednesday, as we mentioned in yesterday's foresight, Fed officials made several important modifications to their policy statement, acknowledging that they have made progress in fighting inflation and are more inclined to cut rates, although they made no specific commitments.

They described inflation as 'somewhat' high, which is a clear downgrade. They emphasized that this progress means that for the first time since they rapidly raised interest rates to counter high inflation two years ago, they are now able to treat their dual mandate of low and stable inflation and a strong job market more equally.

The statement also shows that the committee responsible for setting interest rates is concerned about both aspects of its dual mandate. The previous two years' statement had always described policy makers as 'highly concerned' about inflation risks, which has now been abandoned. This shift is significant because it suggests that inflation may no longer be a barrier to rate cuts, especially as the job market continues to cool.

Federal Reserve Chairman Powell's speech at the news conference was a more specific signal of a rate cut in September. Powell said that a rate cut could come as early as September if the overall quality of data, changing prospects and risk balance are consistent with rising confidence in inflation and a stable labor market.

Powell said, 'The question is whether the overall quality of data, changing prospects and risk balance are consistent with rising confidence in inflation and a stable labor market. If the answer is yes, then we could see a rate cut as early as September.'

Powell reiterated his confidence in continued inflation decline, stating that the Fed does not need 100% focus on inflation because they have made progress. As inflation cools, the Fed can more equally evaluate inflation and job markets.

After the Federal Reserve interest rate decision was announced, traders in the interest rate futures market continued to bet that the Fed would begin easing restrictive policies and cut rates by 25 basis points in September. At the same time, more industry insiders began to believe that the Fed will cut rates at all three meetings this year (September, November, and December)-predicting over 72 basis points (certain three cuts being 75 basis points) in total rate cuts for this year.

Yung-Yu Ma, chief investment officer of BMO Wealth Management, said, 'Powell repeatedly emphasized that if the labor market weakens further, there is room for rate cuts, which is reassuring for investors. Barring any unexpected developments, a rate cut in September seems like a done deal. The feeling now is that the Fed will support the market in the next year, and interest rates will be on a downward trend-which is good news for the stock market.'

Travis Keshemberg, senior portfolio manager at Allspring Global Investments, also pointed out that 'as expected, the Federal Open Market Committee (FOMC) this time decided to keep interest rates unchanged. We believe that as long as future data continues to meet our expectations, the Fed will conduct its first rate cut in this cycle at the September meeting.'

In addition, Adam Button, chief currency analyst stationed in Toronto for ForexLive, believes that "the Fed hopes to let the data play a role for a period of time, even if it risks falling behind the curve. Everyone in the market knows that the (September rate cut) has been digested, and the Fed knows that it has been digested, so not fighting back is a kind of acquiescence to market pricing."

Regarding the trend of gold prices, Bob Haberkorn, Senior Market Strategist at RJO Futures, said that the Fed rate cut, coupled with geopolitical risks in the Middle East, could push gold prices up to $2,700 per ounce.

Editor/Somer