A $14 trillion rally that has taken stocks to record highs is heading for an inflection point next week, with investors expecting the Federal Reserve to resume cutting interest rates at its long-awaited monetary policy meeting.
The S&P 500 Index is up 32% from its April lows, buoyed by bets that the Fed will lower borrowing costs several times this year, and a 25-basis point reduction on Wednesday is seen as a lock. Bullish traders may have history on their side: The index has been 15% higher, on average, a year after cuts resumed following a pause of six months or more, data from Ned Davis Research going back to the 1970s show. That compares to a 12% gain in the same period after the first cut of an ordinary cycle.