Last Friday, the non-farm payroll data fell short of expectations, reigniting concerns about a recession in the U.S. economy and leading to a sharp decline in U.S. stocks. Both the Japanese and South Korean stock markets opened lower, with the Nikkei 225 index dropping by as much as 3% at one point, but the losses subsequently narrowed. As expectations for a significant interest rate cut by the Federal Reserve in September increased, European and American stock markets rebounded significantly, with most star tech stocks rising, and Tesla gaining over 2%.

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After experiencing a "summer storm," the U.S. stock market is gradually recovering, mainly thanks to the strong performance of the 493 components of the S&P 500 index, excluding the seven tech giants. Since mid-July, tech stocks have overall declined by 5.3%, but the S&P 500 index has dropped by less than 1%, demonstrating the resilience of other sectors such as real estate and utilities, which have risen by 11% respectively. Over the past two years, tech giants like Nvidia and Microsoft have been the main drivers of the market due to their profit growth and artificial intelligence initiatives. However, as concerns about slowing economic growth intensify and expectations for an upcoming interest rate cut by the Federal Reserve rise, investors are beginning to shift towards traditional sectors such as real estate and consumer staples.

Glen Capelo, Managing Director of Fixed Income at Mischler Financial Group, stated that if the Federal Reserve chooses to cut interest rates by 25 basis points, it could lead to a sell-off of U.S. Treasuries, but this outcome largely depends on Powell's press conference.

On September 18, Eastern Time, the Federal Reserve announced a reduction in the target range for the federal funds rate from 5.25%-5.50% to 4.75%-5.00%. This is the first rate cut since March 2020, with a decrease of 50 basis points. The decision was passed with a vote of 11 to 1, with only Federal Reserve Governor Bowman opposing, advocating for a 25 basis point cut.

According to Bloomberg, on Monday, Ed Yardeni, a well-known strategist on Wall Street and founder of Yardeni Research Inc., stated that due to the Federal Reserve's significant interest rate cut last week, the U.S. stock market could soar to new highs, but if the central bank's chairman does not act cautiously, it could also lead to a resurgence of inflation. He also pointed out, "The latest policy decision has increased the likelihood of stock prices 'melting up' from 20% to 30%, a phenomenon similar to the S&P 500's 220% surge from 1995 to the end of the last century during the internet bubble." He believes the probability of a bull market is 80%, while the likelihood of a market turmoil similar to the 1970s is 20%, when global stock markets were shaken by inflation and geopolitical tensions.

Last week, the Federal Reserve initiated a significant rate cut of 50 basis points. Jill Carey Hall and her team of quantitative strategists at Bank of America pointed out in their latest research report on Tuesday that the bank's clients have been aggressively buying U.S. stocks, with a net purchase of $6.9 billion, marking the largest inflow of funds since October 2022 and the third-largest inflow in the history of Bank of America's data, with the so-called "smart money" inflow being the most pronounced.

On September 18, the Federal Reserve announced a 50 basis point rate cut, marking the beginning of a loosening cycle. However, analysts warn that the upcoming earnings season is more important for U.S. stocks. Although the S&P 500 index has risen about 19% this year, the market needs to be cautious of the panic that may arise from downward revisions of corporate profit expectations.

After the Federal Reserve cut interest rates by 50 basis points, U.S. stocks reached an all-time high, but European Central Bank President Christine Lagarde warned that the global economy faces serious challenges, similar to the pressures of the Great Depression in the last century. In her speech at the International Monetary Fund in Washington, Lagarde mentioned that the current global economy is affected by factors such as "economic nationalism," the collapse of global trade, and technological advancements, which bear similarities to the situation in the 1920s.

JPMorgan Chase CEO Jamie Dimon expressed skepticism about the prospects of a "soft landing" for the U.S. economy, believing the likelihood is low. He pointed out that although inflation has decreased, it will not easily dissipate due to factors such as fiscal deficit spending. Dimon stated at an event on Friday that he is not optimistic about the economic outlook after the Federal Reserve cuts interest rates, emphasizing that inflation may be more stubborn than investors expect.

Despite a strong rebound last week, the S&P 500 and Nasdaq Composite Index experienced a slight pullback this week, while the Dow Jones Industrial Average continues to trade near historical highs, demonstrating the resilience of the market. Additionally, Federal Reserve Chairman Powell's remarks indicated that inflation is no longer a major threat, suggesting that interest rate cuts may be on the horizon, which further bolstered market confidence.