Currently, US stock traders are closely monitoring the next move of the Federal Reserve. With US inflation cooling down, it seems that a rate cut in September is a sure thing. Although a rate cut by the Federal Reserve is not always beneficial for the stock market, given the current economic situation in the United States, once the Federal Reserve activates the rate cut button, the US may see a wave of bullish market.

Paul Christopher, chief global investment strategist for Wells Fargo & Co., said in an interview with the media on Thursday that the US stock market is about to experience a bull run that has not been seen in 30 years.

He pointed out that the current market has similarities with the market in 1995, when the stock market was prosperous and the S&P 500 index hit 77 record highs.

Christopher said investors may currently face an environment similar to 1995 - inflation is falling and the economy is 'not collapsing'.

Christopher also said the Federal Reserve 'is in a good position' if it can be proactive enough. He hinted that the Fed will cut interest rates by 50 basis points in September and 'cut rates a few more times' before the end of the year.

'We still have a good chance of achieving an economic soft landing.' He added.

The Federal Reserve began raising interest rates in March 2022 to resist inflation. After a series of rate hikes by the Fed, the current inflation rate is far below the peak in the summer of 2022. Official data released by the US on Wednesday showed that the consumer price index (CPI) rose 2.9% year-on-year in July, falling for the fourth consecutive month and returning to a two-digit number for the first time since March 2021.

At the same time, the thing people are most worried about - the Fed's rising interest rates may trigger an economic recession - has not happened. According to the preliminary GDP data for the second quarter released by the US Department of Commerce, the US economy grew by 2.8% in the last quarter, not only far higher than the first quarter's 1.4%, but also higher than economists' expectations of 2.1%.

Prosperous 1995

Looking back at the summer of 1995, when then-Federal Reserve Chairman Greenspan was at the helm, the Fed also launched a series of interest rate cuts. The rate-cutting cycle at that time also coincided with a slowdown in US inflation, and accompanied by a 'soft landing' of the economy.

According to statistics, one month after Greenspan began to cut interest rates on July 6, 1995, the S&P 500 rose by 2.3%; three months later, the increase was 7.2%, and six months later, it was 14.1%; 12 months later, the increase expanded to 23%; and 18 months later, the increase was a staggering 41.4%. The above data on the increase in the S&P 500 index is calculated from the closing on July 5, 1995.

Financial and technology stocks expected to benefit

Christopher expects more volatility in the stock market in the coming months, and he points out that geopolitical tensions and the presidential election bring uncertainty. He believes that if the Federal Reserve loosens policy appropriately, then investors may benefit greatly after this period. 'The most likely decline in short-term interest rates will benefit financial and technology stocks, as financial institutions will receive more income from deposits, and the profits of technology companies will improve, and these two trends are exactly the same as the situation in 1995.'

It is worth noting that the current US stock market is already in a long bull market cycle. In the past year, the S&P 500 index has risen by nearly 26%, and in the past five years, it has almost doubled.

It is worth noting that the US stock market is currently in a long bull market. In the past year, the S&P 500 index has risen by nearly 26%, while the increase in the past 5 years has been close to double.

Editor/ping