The US stock market party may not be over yet? The Fed's interest rate cuts could set off a "melt-up" rally.

Over the years, Ed Yardeni, a veteran of Wall Street who firmly believes in the bull market of the US stock market, founder of the renowned investment firm Yardeni Research, recently stated in an interview that due to the unexpected significant rate cut of 50 basis points by the Federal Reserve last week, opening up a loose monetary policy cycle, the US stock market may experience a "melt-up" trend due to rapid easing - that is, the stock market may continue to soar to record highs, eventually leading to a bubble similar to the late 1990s internet bubble. This Wall Street veteran also mentioned that if the Federal Reserve and other global central banks do not take a cautious stance, it may lead to a rapid resurgence of inflation. Yardeni stated that the Federal Reserve's latest policy decision has increased the probability of a "melt-up" in the US stock market from 20% to 30%. The best explanation of the term "melt-up" is the scenario during the internet bubble period, when the S&P 500 index skyrocketed over 220% from 1995 to the end of the last century. In a report he recently released, Yardeni predicted that the S&P 500 index is expected to hit 5800 by the end of the year, compared to the index closing around 5718 on Monday near its all-time high. He further expressed optimism about the US stock market in the interview, stating that with the Federal Reserve's 50 basis points rate cut initiating a loose monetary policy cycle, the S&P 500 index could climb above 6000 points. Yardeni also believes that the probability of a long-term bull market in US stocks is as high as 80%, while retaining a 20% probability to deal with stock market turbulence similar to the 1970s, when global stock markets, including US stocks, were in turmoil due to inflation rates and geopolitical tensions. The Wall Street veteran also reminded investors to remain cautious: rapid easing by the Federal Reserve may pose risks. While Yardeni remains bullish on the US stock market, he also advised investors to maintain a cautious attitude while seeking profits, stating that if global economic growth begins to overheat, there could be larger risks for risky assets such as stocks. "If they (global central banks) overheat the economy, leading to continuous bubbles in the stock market, they will generate a series of problems," Yardeni emphasized in a media interview on Monday. He added that the Federal Reserve seems to have overlooked the upcoming US presidential election, where both candidates have policies that could potentially reignite US inflation rates. Multiple Federal Reserve policymakers have reiterated their confidence in the decision to cut rates significantly to initiate a loose monetary policy cycle, indicating a possibility of further 50 basis points rate cuts by the Federal Reserve in the future. Yardeni believes that such rapid easing measures could reignite inflation. Minneapolis Fed President Neel Kashkari stated on Monday that he supported the Federal Reserve's decision to cut rates by 50 basis points, but personally expects smaller 25 basis points rate cuts at the November and December Federal Reserve monetary policy meetings. Meanwhile, Atlanta Fed President Raphael Bostic stated that with the risks to inflation and employment becoming more balanced, last week's significant rate cut adjustment will help bring US benchmark interest rates closer to neutral levels. The S&P 500 index is expected to fluctuate upwards towards 6000 points by the end of the year, and may continue to set new records next year. The US stock market got off to a rocky start this month, with the S&P 500 index falling over 4% in the first week. However, since then, investors have gained confidence in the ability of Federal Reserve policymakers to drive the US economy to a "soft landing" through a rate-cut cycle, potentially leading to the S&P 500 index achieving its best September performance since 2019 - historically September being the worst month of the year for the index. Yardeni once again leans towards his "long-term bullish view" of the US stock market, stating that the market is currently in a new "roaring twenties" era under the comprehensive leadership of revolutionary artificial intelligence technology, with core indicators such as a significant leap in productivity, accelerated economic growth, and substantial stock returns. However, he emphasized in the interview that the probability of such a scenario has decreased from his previous prediction of 60% to 50%. According to a compilation of forecasts from top Wall Street strategists by institutions, Yardeni is usually one of the most optimistic stock market forecasters on Wall Street, with a target benchmark for the S&P 500 index at 5800 points, but he emphasized on Monday that it may surpass 6000 points in an optimistic scenario. 6000 points - a previously (at least until the end of 2023) astonishing and seemingly radical index prediction, now aligning with many optimistic Wall Street strategists' latest forecasts as they steadily enhance their bullish outlook on the US stock market, to keep pace with the S&P 500 index's bull market rise of up to 20% this year. BMO Capital Markets, a leading global investment institution, has the highest forecast for the S&P 500 index, reaching 6100 points, with Evercore ISI ranking second, predicting the S&P 500 index to close at 6000 points by the end of the year. They also predict that the AI investment trend could drive the US stock market to new highs of 7000 points by 2025. On the other hand, Barry Bannister, Chief Equity Strategist at Stifel Nicolaus & Co., warned last week that the market is experiencing a "Groundhog Day" similar to the internet bubble period, and he has predicted a 13% market crash in the fourth quarter of the US stock market. Bannister successfully predicted the bull market momentum in US stocks in 2023, outperforming many top strategists. Scott Rubner, Managing Director of Global Markets at Goldman Sachs, who accurately predicted the tech stock downturn triggering a market correction earlier this year, is also bullish on the US stock market at least until the end of the year, expecting a rebound by the end of the year, but emphasizing a significant rebound only after experiencing adverse short-term conditions such as technical corrections, fund flows, and pre-election anxiety. Rubner stated that regardless of which US presidential candidate wins.It is possible that the S&P 500 index will experience an end-of-year rebound driven by FOMO (fear of missing out) stimulation, and the index may rise to 6000 points by the end of the year.As the US stock market continues to hit new historical highs, the technical analysis team from Oppenheimer, a Wall Street investment institution, believes that there are almost no signs indicating that the market is about to peak. The institution is encouraged by the fact that over 60% of the stocks listed on the NYSE are trading above the 200-day moving average, a healthy bullish sign of the market rise, as it indicates that the market rise is being driven not only by a few large tech companies including Apple, Nvidia, and Microsoft. "If the current bull market in US stocks follows historical average levels, the US stock market may continue to rise until the end of 2025, with the S&P 500 index reaching around 7000 points by then," Oppenheimer stated in a recent bullish trend report on the US stock market.