Next Fed interest-rate cut could slide into 2026

Adrian Zuercher of UBS stated that the equity market has significant upside potential if the Federal Reserve indicates further rate cuts. In an interview with Bloomberg Television, he noted that US markets are currently healthy, bolstered by strong earnings in the third quarter. However, he also mentioned that many investors are positioned for profit-taking, which may lead to fluctuations in the market.

Investors are gaining confidence in a potential rebound of the South Korean won, bolstered by recent verbal interventions from Korean authorities. These statements have reinforced expectations of stronger economic growth and the possibility of easing measures from the Federal Reserve, which could help mitigate further losses in the currency's value.

Bond traders are preparing for a significant influx of data that is expected to clarify the pace at which the Federal Reserve will proceed with interest-rate cuts. These cuts have contributed to the largest gains in US Treasuries since 2020, reflecting a shift in market expectations. The upcoming data release is anticipated to solidify traders' expectations regarding the Fed's monetary policy decisions.

Bonds are on track for their best performance since 2020, driven by Federal Reserve rate cuts that are alleviating concerns over budget deficits. This positive trend in the bond market includes both Treasurys and corporate debt, indicating a shift in investor sentiment as they respond to the monetary policy changes. The Federal Reserve's actions are seen as a significant factor in boosting bond prices, suggesting a favorable environment for fixed-income investments.

Federal researchers have found that tariffs can actually lower inflation. This occurs because tariff shocks function as aggregate demand shocks, which negatively impact employment and economic activity. The findings indicate that both inflation and unemployment move in the same direction as a result of these tariff shocks.