JPMorgan Sounds Alarm: Fed May Pull Back Rate Cuts—Gold Emerges as Key Hedge
Fed rate cuts hitting a wall? JPMorgan warns investors to brace for a policy reversal—and points to gold as the smart hedge.
Wall Street's Wake-Up Call
JPMorgan's latest analysis signals turbulence ahead for rate-sensitive assets. The bank's strategists highlight growing risks that the Federal Reserve might backtrack on anticipated monetary easing.
Golden Safety Net
Amid the uncertainty, gold shines as a classic safe haven. The metal's role as a non-yielding asset becomes particularly attractive when traditional rate forecasts wobble.
Because nothing says 'stable' like betting on a shiny rock while bankers change their minds every quarter.
JPMorgan’s trading desk has cautioned investors of a potential pullback after the expected Fed rate cut on September 17. The bank warned traders that a potential sell-the-news could happen as the wider markets continue to record bullish sentiment catalyzed by high odds of a 25 bps Fed rate cut.
The odds of a 25 bps Fed rate cut on Kalshi and Polymarket hovered around 87% on Monday. Last week’s weak labor data elevated investors’ hopes for a Fed rate cut in a bid to bolster economic growth.
What is the Solution Offered By JPMorgan?
The bank noted that the September market weakness remains a threat to the notable rebound. For instance, the S&P 500 has rebounded over 30% since April this year, heavily influenced by tech stocks.
As such, JPMorgan has suggested that investors can take refuge via the VIX call option and the Gold market. However, the bank noted that there is a chance that the market may continue to rise further in the subsequent days after the expected Fed rate cut, since the odds of a recession have receded.
How to trade the Crypto Market
The wider crypto market has in the past few months moved in tandem with major stock indexes. Furthermore, the crypto market has been reacting to the midterm uncertainty despite the robust fundamentals, especially clear regulatory frameworks in the United States that have attracted more institutional capital.
With the gold price having broken out and rallied to a new all-time high above $3,640 on Monday, the Bitcoin price is well positioned to follow soon. Furthermore, JPMorgan analysts still believe that the Bitcoin price is undervalued relative to Gold, thus forecasting a midterm target of $126k.
The bullish sentiment for Bitcoin and the wider crypto market is bolstered by the mainstream adoption by institutional investors and the anticipated spot crypto ETF approvals.
