Good news is all bad news! Wall Street strategist warns: US stocks' rise may extinguish after interest rate cut.

Top Wall Street strategists say that if the Federal Reserve lowers interest rates as expected this week, the record-breaking rally in the US stock market could temporarily lose momentum. Strategists from Morgan Stanley, J.P. Morgan, and Oppenheimer Asset Management have warned that as investors shift their focus to potential economic slowdown issues, market sentiment may shift from optimism to caution. Expectations of a rate cut by the Federal Reserve have provided a fresh impetus to the S&P 500 index, which is currently nearing historical highs. However, there are growing concerns that a 25 basis point rate cut by the Federal Reserve on Wednesday may not be enough to address issues with the slowing US labor market. Investors are still assessing the impact of tariffs on inflation, with the current inflation rate still above the Federal Reserve's 2% target. Michael Wilson of Morgan Stanley said, "The short-term risk lies primarily in the contradiction between lagging and weak employment data and the Federal Reserve's response measures, which may not meet the market's 'need for speed'." Nevertheless, he still recommends buying on dips, and his most optimistic forecast is that the S&P 500 index will rise by 9% to reach 7200 points by mid-2026. The S&P 500 index has frequently hit new highs. J.P. Morgan strategists said that the US stock market has hit multiple historical highs despite soft indicators, and once the Federal Reserve makes its first rate cut since 2025, this trend may reverse. A team of strategists led by Mislav Matejka at J.P. Morgan said, "Once accommodative policies are reinitiated, the stock market may temporarily become more cautious, considering more potential downside risks and reassessing the currently overly optimistic stance." These warnings contradict the prevailing bullish sentiment towards the US stock market. The S&P 500 index has risen by 12% this year driven by gains in large tech stocks. Institutions including Deutsche Bank and Barclays have raised their year-end targets for the S&P 500 index this month, citing strong corporate profits and the artificial intelligence trend. John Stoltzfus, Chief Investment Strategist at Oppenheimer Asset Management, also stated that as long as the fundamentals of the US economy remain resilient, any post-rate cut declines may be limited in scale and duration. He said, "If the Federal Reserve cuts rates by only 25 basis points as most people expect, then the market may experience a certain degree of decline due to this news."