Bank of America warns: Fed's dovish rate cut could end stock market rally

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U.S. Bank strategists warn that if the Federal Reserve takes an overly cautious attitude toward the economic outlook, it could jeopardize the year-end stock market rally. As the S&P 500 index approaches historic highs, investors are hoping for the ideal scenario — the Federal Reserve cutting interest rates alongside easing inflation while the economy remains resilient. However, Bank of America strategist Michael Hartnett points out that if the Fed signals a dovish stance at next week's meeting, this optimism will be tested, as it may imply the economic slowdown is worse than expected. Hartnett wrote in a report: "The only thing that could kill the 'Santa Claus rally' is a dovish rate cut triggering a sell-off in long-term bonds." He is referring to longer-term U.S. Treasury bonds.
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