In the early morning of September 19th, the Federal Reserve violently initiated a 50 basis point interest rate cut, while the unexpectedly low number of initial jobless claims announced on Thursday further strengthened confidence in a soft landing of the US economy.

The double buff overlap has jointly promoted the surge in US stocks - on Thursday$S&P 500 Index (.SPX.US)$rose 1.7%, marking the 39th new record high since 2024. The index has risen nearly 20% this year. $Dow Jones Industrial Average (.DJI.US)$ surged more than 500 points, breaking through 42,000 points intra-day, setting a new historical high; while semiconductor stocks, led by $PHLX Semiconductor Index (.SOX.US)$ , soared 4.3%, with large-cap growth tech stocks achieving a comprehensive increase.

Historical trends show that the Federal Reserve's rate cuts typically have a positive impact on the performance of the US stock market within 12 months after the first rate cut. Since 1989, the Federal Reserve has undergone six rate-cutting cycles, and in four of those cycles, stocks have risen a year later. Furthermore, according to data from Evercore ISI, during non-recessionary periods, the S&P 500 index has averaged a 14% increase in the six months following the start of a rate-cutting cycle.

A stone has stirred up a thousand waves. This round of rate cuts has started with a grand start that is surprising to the market. The future trend of the US stock market is thrilling, and the major Wall Street banks that have been quiet for the summer are adjusting their target points for the end of the year.

According to Bloomberg data, about ten institutions have adjusted their expectations for the S&P 500 index since August. The most optimistic is BMO Capital Markets, whose chief investment strategist Brian Belski has significantly raised the year-end forecast for the S&P 500 index to 6,100 points from the previous 5,600 points. Worth noting, Belski was one of the few forecasters who correctly predicted last year's stock market rebound. Next is Julian Emanuel, a strategist at Evercore ISI, who has raised the forecast for the S&P 500 index to 6,000 points, currently ranking second.

Analysts are adjusting their target prices. What are they smelling?

The Federal Reserve's surprising move to cut rates by 50 basis points "for the first time" has caused market volatility in the short term after the news came out, but it has also been quickly accepted and recognized by the market.

Fawad Razaqzada from City Index and Forex.com said, 'Despite some volatility following the Fed's rate cut, the upward trend of the S&P 500 index remains intact. The Federal Reserve's decision to cut rates by 50 basis points has been largely welcomed by investors. This move is seen as bold but necessary, as it can alleviate economic concerns without triggering panic reminiscent of the 2008 financial crisis.'

Due to the Federal Reserve's unexpectedly aggressive rate cut, institutional analysis suggests that the possibility of a soft landing for the economy in the short term may further increase. CICC pointed out that the Federal Reserve's actions indicate that its reaction function has shifted from focusing on inflation to focusing on employment. Historically, soft landings have usually been accompanied by rate cuts, as moderate adjustments to monetary policy after significant tightening help avoid excessive tightening.

Regarding this rate cut, CICC is optimistic and expects that improved supply factors and short-term manageable upward risks to inflation will be supportive of demand expansion. The US economic growth may continue to maintain a higher growth rate, increasing the likelihood of a soft landing. In addition, the Federal Reserve officials have lowered their inflation forecasts in their latest projections while keeping their forecasts for economic growth unchanged, indicating their confidence in a soft landing.

Solita Marcelli, of UBS Global Wealth Management, said: "Historically, during periods when the Federal Reserve cuts interest rates and the US economy does not fall into a recession, the stock market performs well. We expect this time to be no exception. Our baseline expectation is still that the S&P 500 index will reach 5,900 by the end of the year and rise to 6,200 by June 2025." Marcelli believes that stock gains will widen, especially for growth stocks, particularly in the technology sector, and still have further room to rise.

Brian Belski, the chief investment strategist at BMO Capital Markets and one of the most optimistic analysts, shares a similar view. He has revised his outlook for the stock market for the second time this year and said, "We are still surprised by the market's strong rally and have decided to make more adjustments in addition to gradual adjustments."

Belski believes that the Federal Reserve's shift to accommodative policies and increased market participation are reasons for his positive outlook. However, increased market participation is not limited to the so-called "Big Seven Tech" stocks. BMO predicts a soft landing for the US economy and describes the current market environment as similar to the mid-1990s when the US stock market was able to maintain high price-to-earnings ratios for several years during the dot-com bubble.

Despite the surge, concerns about ongoing volatility in the US stock market remain.

However, even with the continued upward trend in the US stock market, many institutions are still concerned about potential volatility. Tom Lee, co-founder and head of research at Fundstrat Global Advisors, a US investment institution, recently issued a warning that investors should continue to exercise caution before the official November election. It is worth noting that due to his outstanding past predictions of the US stock market trends, Lee is jokingly referred to as the "Wall Street Oracle."

Although Lee believes that the Federal Reserve's rate-cutting cycle lays a strong foundation for the market's strength in the next month or three months, he also candidly admits that there is still a lot of uncertainty in the stock market's performance from now until election day, which makes him hesitate to recommend investors to invest. In the long run, Lee is very bullish on the US stock market and predicts that the S&P 500 index could double to 15,000 by 2030.

Analysts at Societe Generale, a French bank, stated in a report that other valuation indicators such as price-to-book ratio and price-to-sales ratio indicate that US stocks are significantly overvalued compared to historical averages. For example, the current trading price of US stocks is five times their book value, while the long-term average is 2.6 times. Societe Generale said, "The current level can be summarized in one word: expensive."

On the other hand, Warren Buffett, the stock market guru, has recently made some interesting moves in the capital markets. Since mid-July, Berkshire Hathaway has sold nearly $9 billion worth of Bank of America stocks and continues to sell. In addition, they have reduced their holdings in the second quarter. $Apple (AAPL.US)$Please use your Futubull account to access the feature.$Bank of America (BAC.US)$ Equal-weighted stocks, cleared positions in the cloud computing growth tech.$Snowflake (SNOW.US)$, reduced holdings in $Capital One Financial (COF.US)$Please use your Futubull account to access the feature.$T-Mobile US (TMUS.US)$ as well as previously bullish on$Chevron (CVX.US)$.

By the end of the second quarter, Berkshire Hathaway's stock holdings market value decreased to $279.969 billion, down 19.6% and 15.6% respectively compared to the previous quarter, while cash reserves surged to $276.9 billion.

However, as of the third quarter so far, Apple has risen nearly 9%, while despite being heavily sold off, Bank of America has shown resilience with an increase of about 3% in the third quarter. In terms of the overall U.S. stock market, the S&P 500 index has risen for three consecutive months, accumulating a total increase of over 4.6%; the Nasdaq's performance is weaker but still records a 1.59% cumulative increase; and the Dow has performed the best, already up more than 7% in the third quarter. Whether the stock market god is preparing for rainy days ahead or making a wrong judgment remains to be seen in the future.

Editor/Emily