JPMorgan warns Fed rate cut could become ’Sell the News’ event

Investing.com -- JPMorgan maintains its "lower conviction Tactical Bullish" market outlook despite concerns that the Federal Reserve’s expected interest rate cut on September 17 could trigger a market pullback.

In a market intelligence note, JPMorgan’s Andrew Tyler highlighted that while the current bull market appears robust with new support forming as former leaders like NVIDIA (NASDAQ:NVDA) give way to others such as Broadcom (NASDAQ:AVGO), several risk factors remain.

"We have concerns that the September 17 Fed meeting which delivers a 25bp cut could turn into a ’Sell the News’ event as investors pullback to consider macro data, Fed’s reaction function, potentially stretched positioning, a weaker corporate buyback bid, and waning participation from the Retail investor," Tyler wrote.

The bank noted that the AI investment theme has returned, providing significant market support, while economic growth appears to be strengthening alongside robust earnings. Trade tensions have also seen incremental improvement.

However, JPMorgan identified inflation, employment, and trade as key risk areas. Even with a potentially hawkish surprise in Thursday’s CPI data, the bank believes the Fed will proceed with its planned rate cut next week.

The note warned that tariff-induced cost increases are coming, though the pace and scale remain uncertain. Additionally, declining labor supply combined with potential rate-cut-driven labor demand could trigger sticky wage inflation.

JPMorgan’s investment recommendations remain unchanged from last week, though the bank suggested equity investors consider adding or increasing gold exposure as rate cut expectations drive the U.S. dollar lower.

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