Will the U.S. Bull Market Get Another Round, or Is It Time to Pay the Bill? The One Thing Tech Stocks Fear Most Ahead of the FOMC Decision

Wall Street has an unwritten rule: earnings can grow gradually, but valuations should ideally stay forever young. The problem is that tomorrow’s FOMC may remind investors that money has a price, too.
For the U.S. stock market, especially Nasdaq tech stocks, the path of interest rates is crucial. If the market expects rates to fall in the future, the discounting pressure on companies’ future cash flows usually eases, giving high-valuation stocks room to breathe.
But don’t take that to mean “rate cuts equal gains across the market.” If the Fed maintains a hawkish stance and stresses that inflation risks remain, bond yields and the dollar could strengthen, putting pressure on growth stock valuations.
More subtly, even if the Fed signals an easing, the market still has to ask: Why cut rates?
If the answer is improving inflation and a soft landing, the stock market may be happy to celebrate; if it’s significant deterioration in employment and slowing economic growth, rate cuts could instead raise concerns about downward earnings revisions.
It’s like a boss suddenly announcing a lighter workload: if it’s because the company has become more efficient, everyone is naturally happy; if it’s because all the orders have disappeared, no one is likely to applaud.
Investors should therefore look beyond the policy rate and also watch Powell’s assessment of economic growth, employment, and inflation, as well as how Treasury yields react.
What the U.S. stock market really needs isn’t simply rate cuts, but a perfect alignment between rate cuts and corporate earnings.$ZEC

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