Bank of America strategists warned that if the Federal Reserve is too cautious about the economic outlook, it may jeopardize the rise in the stock market at the end of the year. As the S&P 500 is approaching an all-time high, investors are looking forward to the ideal scenario — that is, the Fed cuts interest rates as inflation falls, while the economy remains resilient. However, Bank of America strategist Michael Harnett pointed out that if the Federal Reserve releases dovish signals at next week's meeting, this optimism will be tested, as this may suggest that the economic slowdown exceeds expectations. Harnett wrote in the report: “The only thing that could kill the 'Christmas market' is that dovish interest rate cuts trigger a sell-off of long-term bonds.” He was referring to US Treasury bonds with a longer maturing period.

Bank of America strategists warned that if the Federal Reserve is too cautious about the economic outlook, it may jeopardize the rise in the stock market at the end of the year. As the S&P 500 is approaching an all-time high, investors are looking forward to the ideal scenario — that is, the Fed cuts interest rates as inflation falls, while the economy remains resilient. However, Bank of America strategist Michael Harnett pointed out that if the Federal Reserve releases dovish signals at next week's meeting, this optimism will be tested, as this may suggest that the economic slowdown exceeds expectations. Harnett wrote in the report: “The only thing that could kill the 'Christmas market' is that dovish interest rate cuts trigger a sell-off of long-term bonds.” He was referring to US Treasury bonds with a longer maturing period.