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

According to the Wisdom Financial APP, Fidelity International indicated that the Federal Reserve stated that considering the reduced risks of inflationary pressures and the increased risks of a downturn in the labor market, it decided to cut interest rates by 0.5%, lowering the federal funds rate target to 4.75% to 5.00%. This is the first rate cut since July 2023 after maintaining the policy rate at 5.25% to 5.5% for 8 consecutive times, ending the most aggressive rate hike cycle since the 1980s. The basic scenario is a soft landing of the U.S. economy (low growth and low inflation), and it is expected that under the Fed's accommodative financial conditions, there should be no risk of a recession. However, due to increased political uncertainty risks, a slowdown in Fidelity's leading indicators, and the emergence of negative seasonal factors, Fidelity is now seeking more ideal risk-return opportunities. Therefore, it gives a neutral investment rating for stocks and maintains a neutral investment rating for credit bonds.

Given the escalating signs of conflict in the Middle East and Russia-Ukraine, and the intensification of the U.S. presidential election in November, the investment strategy recommends a global high-quality dividend strategy, combined with global high-quality bonds as the main core asset allocation to counter market volatility, and is optimistic about the long-term prospects of technology stocks.

The five key points in the Fed's post-meeting statement include: 1) Reduced risks of progress in inflation: The post-meeting statement added greater confidence in the inflation rate continuing to move towards 2%, coupled with members' strong commitment to supporting full employment and returning the inflation rate to the 2% target; for the median PCE inflation rate, it is expected to be lowered from 2.6% to 2.3% this year; from 2.3% to 2.1% in 2025; the long-term level remains unchanged at 2%. The median estimate for core PCE inflation rate, is lowered from 2.8% to 2.6% this year; from 2.3% to 2.2% next year. 2) Rising risks of a slowdown in the labor market: The post-meeting statement changed the moderate increase in employment growth to a slowdown in employment growth, indicating an increased risk of cooling in the labor market. For the median estimate of the unemployment rate, it is raised from 4% to 4.4% this year; from 4.2% to 4.4% next year; the long-term level remains at 4.2%.

1. Downward revision of this year's economic growth expectations: In terms of the Summary of Economic Projections (SEP), the median expected economic growth rate, is lowered from 2.1% to 2% this year; remains at 2% next year; the long-term level remains flat at 1.8%. 4) There is still room for a 0.5% rate cut by the end of the year: The dot plot shows that there is still room for a 0.5% rate cut by the end of the year, with the possibility of a 0.25% cut at the November and December meetings; a 1% cut in 2025, a 0.5% cut in 2026, and the long-term rate level has been raised 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 this time 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 its balance sheet, and can simultaneously reduce the balance sheet and cut rates as long as bank reserves remain stable.

Fidelity International's Macro and Strategic Asset Team stated that this was a heated debate over whether to cut rates by 0.25% or 0.5%, and ultimately the Fed decided to cut rates by 0.5% considering the continued decline in inflation and the cooling of the labor market in recent months; however, both the Fed's dot plot and Powell's post-meeting press conference emphasized a more cautious approach to the speed and magnitude of future easing policies Overall, although the Federal Reserve has initiated a rate cut cycle with a 0.5% cut, the rhetoric is leaning towards being hawkish. By opening the door to rate cuts, the market understands that once the labor market weakens again, the Federal Reserve will accelerate the pace of rate cuts. Fidelity maintains that a soft landing is still the most likely economic scenario for this year