For The Equity Markets To Keep Rallying, This Has To Happen...

With markets now pricing in at least three rate-cuts and expectations for a July cut surging to over 80%, belief in a pre-emptive "insurance" cut is now consensus - and The Fed had better not disappoint.

However, as Bloomberg's Ye Xie warns, while, historically, preemptive Fed rate cuts have tended to boost the stock market, this time may be different.

Any student of stock market history would tell you that the Fed’s "insurance" cuts in 1995-1996 and 1998 did extend the bull market and economic expansion.

What’s different this time is that the front-end of the yield curve is much more deeply inverted than in the 1990s. In other words, markets have more aggressively discounted policy easing. With Fed fund futures pricing in about 70 basis points of cuts by year-end, the FOMC has a high bar to keep equity investors happy without fomenting recession fears

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