Xiaomo warns: After the Fed cuts interest rates this week, it may be difficult for US stocks to continue to rise

The Zhitong Finance App learned that the J.P. Morgan Chase strategist said that after the Federal Reserve is expected to cut interest rates, the recent rise in the stock market may come to a standstill as investors may choose to make a profit settlement.

The market currently prices the probability that the Federal Reserve will cut interest rates on Wednesday at 92%. Market bets have been rising steadily over the past few weeks, fueled by dovish rhetoric from policy makers, helping to boost the stock market.

“Investors may be tempted to lock in earnings before the end of the year rather than increase directional exposure,” the team led by Mislav Matejka wrote in a report. “Interest rate cuts are now fully reflected in prices, and the stock market has returned to a high point.”

J.P. Morgan's strategists are still optimistic about the medium-term outlook, saying that the dovish US Federal Reserve will support the stock market. At the same time, low oil prices, slowing wage growth, and easing US tariff pressure will allow the Federal Reserve to relax monetary policy without triggering inflation, Mateika wrote.

Global stock markets have rebounded in recent weeks, approaching their all-time high in October. However, due to mixed signals from the health of the US labor market, there is still uncertainty about the Federal Reserve's 2026 policy path.

Other factors likely to boost the stock market in 2026 include reduced trade uncertainty, increased fiscal spending in the Eurozone, and the rapid spread of artificial intelligence in the US, according to J.P. Morgan strategists.

After the Federal Reserve cut interest rates in September, Mateika also warned that the rebound in the US stock market might stall. Since then, the stock index has been volatile, and did not begin to pick up until new optimism about December interest rate cuts emerged in the past few weeks.

In an informal survey, more than three-quarters of the surveyed asset managers (covering Asia, Europe, and Wall Street) said they are adjusting their portfolios for the 2026 risk-appetite environment.