Fidelity: Under loose policy, the United States is unlikely to experience a recession. It is recommended to focus on high-quality global dividend stocks as the main core asset allocation.

According to Fidelity International, the Fed states that the upward risks of inflation have decreased, while the downward risks of the labor market have increased. The decision was made to cut interest rates by 0.5%, lowering the federal funds rate target to 4.75 to 5.00%. This is the first interest rate cut since July 2023, after maintaining policy rates at 5.25 to 5.5% for 8 consecutive times. This marks the end of the most aggressive rate hiking cycle since the 1980s. The basic scenario is a soft landing for the US economy (low growth and low inflation). It is expected that under the loose financial conditions provided by the Fed, there should not be a risk of recession. However, due to increased political uncertainty and a slowdown in leading indicators at Fidelity, along with the emergence of negative seasonal factors, Fidelity is beginning to look for ideal risk-return opportunities. Therefore, a neutral investment rating is given for stocks, and a neutral investment rating is maintained for credit bonds. Due to signs of escalation in the Middle East and Russia-Ukraine conflict, and the intensification of the US presidential election in November, investment strategies are advised to focus on a global high-quality dividend strategy, combined with global high-quality bonds as the main core asset allocation to combat market volatility, and a positive outlook for technology stocks in the long run. Five key points were highlighted in the post-Fed meeting statement: 1) The risk of making progress in inflation has reduced: The statement after the meeting added greater confidence in inflation steadily moving towards 2%, along with the members firmly committed to supporting full employment and bringing inflation back to the 2% target. For PCE inflation year-on-year median estimates, it was revised down from 2.6% to 2.3% this year; 2.3% to 2.1% in 2025; long-term levels remain unchanged at 2%. Core PCE inflation year-on-year median estimate was reduced from 2.8% to 2.6% this year; and from 2.3% to 2.2% next year. 2) Risks of a weakening job market: The statement after the meeting changed the moderate increase in job growth to a slowdown in job growth, signaling an increased risk of cooling in the labor market. The median estimate of unemployment rate was adjusted from 4% to 4.4% this year; 4.2% to 4.4% next year; and long-term level remains at 4.2%. 3) Downward revision of this year's economic growth expectations: In the Summary of Economic Projections (SEP), the median estimate of economic growth rate, this year was adjusted from 2.1% to 2%; next year remains at 2%; long-term level remains unchanged at 1.8%. 4) There is still room for a 0.5% rate cut by the end of the year: The rate dot plot shows a 0.5% room for a rate cut before the end of the year, meaning there may be rate cuts of 0.25% each in the November and December meetings. In 2025, the rate cut will be 1%, in 2026 it will be 0.5%, and the long-term rate level will increase from 2.8% to 2.9%, and the neutral rate may be higher than before the pandemic. 5) Future policy depends on data trends: Chairman Powell stated that the 0.5% rate cut is not a new step towards future rate cuts, and future monetary policy still depends on economic data trends. In addition, he stated that the Fed has not considered stopping the reduction of the balance sheet, and can simultaneously reduce the balance sheet and rates provided that bank reserve levels remain stable. Fidelity International's macro and strategic asset team stated that this was a fierce debate about whether to cut interest rates by 0.25% or 0.5%, and the Fed finally made the decision to cut by 0.5% considering the continued downward trajectory of inflation and the cooling of the labor market in recent months. However, the rate dot plot of the Fed and Powell's post-meeting press conference both emphasized that future loose policies will be more cautious in terms of speed and magnitude. Overall, although the Fed has initiated a rate cut of 0.5%, their statements are hawkish. The Fed has opened the door to rate cuts, and the market understands that once the job market weakens again, the Fed will accelerate the pace of rate cuts. Fidelity maintains that a soft landing is still the most likely economic scenario for this year.