Investors are in a bullish mood.
Cash that they’ve kept in reserve has been poured back into the stock market, and fears of a trade war dragging down the economy have eased, a Bank of America survey of nearly 200 fund managers shows.
And on Wednesday, investors are fully expecting the Federal Reserve to cut interest rates for the first time since December, providing the economy another boost.
The bullishness has helped push the S&P 500 further into record territory over the past week — and up 12.5 percent for the year.
The tech-heavy Nasdaq Composite index, buffeted by continued enthusiasm for artificial intelligence, has risen almost 16 percent in 2025. Oracle rose nearly 36 percent in a single day last week after it reported earnings and announced a $300 billion A.I. infrastructure deal with the maker of ChatGPT.
Even the Russell 2000 index, which tracks smaller companies and is more sensitive to the outlook for the domestic economy, has been on a steady march higher since April. It is now more than 7 percent higher for the year.
Those gains have begun to raise concerns that markets may have climbed too far. Bank of America’s fund manager survey, published on Tuesday, showed that 58 percent of respondents thought stocks are overvalued.
Falling rates could help address that. Investors on Wednesday are expecting a quarter-point cut, or 25 basis points, which is the size of a typical Fed rate move.
The Fed board may have some dissenters — notably, Stephen Miran, a Trump loyalist, who was sworn in as a governor at the central bank just in time for this week’s meeting — who might push for a bigger cut.
But, “any decision to cut by 50 basis points at this stage would appear to be driven more by political pressure than economic necessity,” said Seema Shah, chief global strategist at Principal Asset Management. “A more measured 25-basis-point cut remains the appropriate response, allowing the Fed to get ahead of a slowdown without overreacting to early signs of strain.”
With expectations set, investors are also predicting a more muted move in the stock market on Wednesday, with options prices suggesting a rise or fall of less than 1 percent for the S&P 500, according to analysts at Citi.
Here’s where markets stand ahead of the meeting:
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Futures on the S&P 500 are flat in early trading on Wednesday.
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The 10-year Treasury yield, which has been steadily falling, is now close to crossing below 4 percent for the first time since April, and stood at 4.01 percent on Wednesday. The 2-year Treasury yield, which is sensitive to changes in interest rate expectations, is now at its lowest since 2022, and stood at 3.5 percent.
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The dollar this week fell to its lowest level since 2022, versus a basket of its peers.
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Gold is sharply higher, and on Tuesday crossed above $3,700 per troy ounce for the first time. It is trading around $3,702 per ounce in early trading on Wednesday.
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Oil prices are steady, as they have been in recent months. Brent Crude, the international benchmark, is down slightly, to around $68 per barrel. It has traded between $65 and $70 per barrel since early August.
Joe Rennison writes about financial markets, a beat that ranges from chronicling the vagaries of the stock market to explaining the often-inscrutable trading decisions of Wall Street insiders.
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