Is Faraday Future Intelligent Electric Inc. (FFIE) Stock a Buy

Economic

Summary:

Faraday Future (FFIE) is striving to make waves in the electric vehicle industry with its luxury EVs. But can the company overcome its financial struggles and production delays? Read our in-depth review of FFIE stock and its future prospects in the competitive EV market.

Faraday Future Intelligent Electric Inc. (NASDAQ: FFIE), a California-based electric vehicle (EV) manufacturer, has been in the spotlight since its inception in 2014. Known for its bold vision of creating intelligent luxury EVs, the company has made headlines with its innovative designs, particularly its flagship model, the FF 91. Despite a compelling product portfolio, Faraday Future has faced significant financial and operational hurdles. This article will explore the company's stock performance, challenges, and future prospects in the context of the growing EV market.

FFIE Stock Performance

Faraday Future's stock, trading under the ticker FFIE, has experienced considerable volatility since its public debut. The company went public via a special purpose acquisition company (SPAC) merger with Property Solutions Acquisition Corp. in July 2021. Initially, there was significant investor enthusiasm due to the promise of Faraday’s cutting-edge EV technology. However, like many other SPAC mergers, FFIE's stock price has been volatile.

At its peak, FFIE stock traded as high as $20 per share, fueled by optimism about the potential of the EV market and comparisons to industry leaders like Tesla. However, as of late 2023, the stock has plunged significantly, trading below $1, reflecting broader market skepticism about the company's ability to execute its ambitious plans. This sharp decline was due to a combination of factors, including production delays, financial instability, and competition from more established EV players.

Financial Challenges

One of the most significant issues affecting FFIE stock has been the company's financial struggles. Faraday Future has faced liquidity issues that have delayed the mass production of its vehicles, particularly the FF 91. The company has had to raise capital multiple times to keep operations afloat, which has led to concerns about dilution for existing shareholders.

The company’s financial reports have consistently shown high operational costs and cash burn, raising concerns about long-term sustainability. For instance, in 2023, Faraday Future reported quarterly losses running into the hundreds of millions, and its cash reserves were dangerously low. While the company has secured some funding, it remains to be seen whether it will be sufficient to bring the FF 91 and other models to market on a mass scale.

Production and Delivery Delays

One of the biggest factors impacting investor confidence in FFIE is the repeated delays in bringing the FF 91 to market. Initially, Faraday Future promised that its luxury electric SUV would be available in 2018. However, due to a combination of internal and external factors, including financial issues and supply chain disruptions, the production timeline has been pushed back several times.

In 2023, Faraday Future finally started delivering its first FF 91 units, but the scale of production was far below initial expectations. The company has shifted its focus to limited, high-end deliveries rather than mass production, which may affect its ability to compete with larger EV manufacturers like Tesla, Rivian, and Lucid Motors.

Competitive Landscape

The EV market is becoming increasingly crowded, with legacy automakers and startups alike vying for market share. Tesla remains the dominant player, but companies like Rivian, Lucid Motors, and traditional automakers such as Ford and General Motors are ramping up their EV offerings. This intensifying competition is a significant challenge for Faraday Future, which is still in the early stages of vehicle production.

Faraday Future's strategy of targeting the luxury EV market with the FF 91, which boasts cutting-edge technology and impressive specs (such as a 0-60 mph time of under 3 seconds and a range of over 300 miles), is a bold move. However, the company’s ability to capture a significant portion of the luxury EV market depends on its ability to scale production and deliver on its promises.

Market Sentiment

Market sentiment around FFIE stock is largely negative, with many investors and analysts expressing concerns about the company's long-term viability. Short interest in the stock remains high, signaling that many investors are betting against Faraday Future’s success.

Despite these challenges, there are some investors who believe that FFIE represents a high-risk, high-reward opportunity. The EV industry is expected to grow rapidly over the next decade, and if Faraday Future can overcome its production and financial challenges, it could potentially carve out a niche in the luxury segment of the market. However, this is far from certain, and FFIE remains a speculative play in the eyes of most investors.

Future Outlook

Looking forward, the outlook for Faraday Future and its stock is uncertain. The company has ambitious plans, including the development of multiple EV models beyond the FF 91. However, its ability to execute these plans is contingent on several factors, including its financial health, production capabilities, and competition within the EV market.

Key Factors to Watch:

Production Ramp-Up: Investors will be closely watching Faraday Future's ability to increase production of the FF 91 and deliver it at scale. Any further delays could weigh heavily on the stock.

Financial Stability: The company needs to secure additional funding to stay afloat and execute its long-term plans. Dilution remains a risk for shareholders.

Competition: As more luxury EVs hit the market, Faraday Future will need to differentiate itself through superior technology, design, and brand appeal to survive.

Regulatory and Market Developments: Changes in EV-related regulations, especially those involving subsidies, emissions standards, and technological advancements, could have a major impact on Faraday’s future success.

Conclusion

Faraday Future Intelligent Electric Inc. (FFIE) remains a highly speculative stock with significant risks. While the company’s vision of revolutionizing the luxury EV market is compelling, its financial instability, production delays, and intense competition have weighed heavily on its stock performance. Investors interested in FFIE should proceed with caution, as the company’s future hinges on its ability to overcome numerous challenges and execute its business plan.

In the near term, FFIE is likely to remain volatile, with swings based on production updates, funding news, and broader market sentiment toward the EV sector. Long-term investors need to weigh the risks of the company’s current struggles against the potential for success in the rapidly growing EV industry.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Westpac

Economic

Key results

Quarterly change: -0.2% (last: +0.1%, Westpac f/c: -0.4%, market f/c: -0.4%, RBNZ -0.5%)

Annual change: -0.5% (Last +0.3%, Westpac f/c -0.6%, RBNZ -0.7%)

The New Zealand economy shrank by 0.2% in the June quarter. Estimated growth in the March quarter was trimmed back to a 0.1% rise (previously estimated to be up 0.2%), and there were modest revisions to earlier quarters that largely balanced out.

The 0.2% fall in production GDP was smaller than the 0.4% fall that we and the market were forecasting. Reinforcing that surprise, the less-followed expenditure measure of GDP was unchanged, and the income measure actually rose by 0.2% in real terms.

As we signalled in our preview, the performance across industries was a mixed bag. Retailing, wholesaling and forestry saw the most significant declines. On the positive side, manufacturing saw a strong 1.9% rise, and personal services such as healthcare and recreation held up better than we expected.

As Stats NZ had noted, changes in the timing of tobacco imports have disrupted the pattern of quarterly GDP to some degree, boosting growth in the March quarter and acting as a drag on growth this time.

On the expenditure measure of GDP, there were gains in household spending, government spending and business investment. Goods exports were the main drag on growth, falling back by 4.4% after a strong rise in the March quarter.

Implications

While still soft, these results come as something of a relief. Higher-frequency activity data had taken a marked turn lower in May and especially June, raising concerns that the New Zealand economy’s drawn-out slowdown could be entering a new, much tougher phase. However, not only has the monthly data improved somewhat in July and August, but in GDP terms the June quarter itself turned out to be no worse than what we’ve seen over the last couple of years.

We continue to expect the RBNZ to cut the OCR by 25bps each at the October and November reviews. While financial markets will no doubt fixate on the idea that the US Fed’s decision this morning has opened the door for 50bp rate cuts elsewhere, there isn’t much in the local data that argues for the RBNZ to step up the pace of easing beyond what it had already signalled in its August policy statement.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Pepperstone

Economic

Central Bank

Powell & Co. kicked-off the easing cycle at the September FOMC with a 50bp cut, mirroring the way in which normalisation began in both 2007 and 2001, historical omens that the FOMC will naturally be seeking to avoid this time around.

The ‘jumbo’ cut, which wasn’t my base case, but to which markets had assigned a roughly 60% probability before the decision, seems over-the-top given recent economic data, though has clearly been delivered by policymakers beginning to worry about whether or not the ‘soft landing’ will stick. The target range for the fed funds rate now stands at 4.75% - 5.00%, after the first rate cut since March 2020.

September 2024 FOMC Review: Kicking-Off With A Jumbo Cut_1

Interestingly, the decision to deliver a 50bp cut was not a unanimous one, with Governor Bowman dissenting in favour of a more modest 25bp cut, the first dissent by a Governor since 2005. This is an interesting shift as one of the hallmarks of Powell’s chairmanship so far has been unanimity among FOMC voters. One wonders whether this is a sign of things to come, as the FOMC could well become more fractured were data to continue to paint a mixed picture as the easing cycle progresses.

Accompanying the rate decision, was the eagerly-anticipated policy statement, which market participants parsed closely for hints on the future policy outlook, chiefly the pace, and magnitude, of further easing.

Unsurprisingly, the statement didn’t make any pre-commitments to the timing, or the size, of any additional rate cuts, instead noting that policymakers will take a data-dependent approach in determining the size of any “additional adjustments” to the fed funds rate. Nevertheless, policymakers did note that risks to each side of the dual mandate are now “roughly” in balance, implying an equal weight on incoming inflation, and jobs, data going forward.

There were a couple of other dovish tweaks to the statement, with the Committee flagging that job gains have “slowed”, while also noting a ‘strong commitment’ to both supporting maximum employment, and returning inflation to 2%, as opposed to solely the latter in the July statement.

September 2024 FOMC Review: Kicking-Off With A Jumbo Cut_2

Along with the statement, the September FOMC also saw the release of the Committee’s ‘dot plot’, showing individual policymakers’ expectations of the appropriate future level for the fed funds rate.

Including the cut delivered today, the median dot now indicates that the fed funds rate will end the year between 4.25% - 4.50%, compared to the 5.00% - 5.25% expectation outlined in June. With just two further FOMC meetings this year, and a 50bp cut having been delivered today, the dots imply that the remaining decisions this year will each result in a 25bp reduction. Further out, the dots continue to see 100bp of cuts in 2025, while both the 2026 dot, and the longer-run estimate of the fed funds rate, now stand at 2.875%. The latter figure, interestingly, is 12.5bp higher than that foreseen in June, perhaps indicating that estimates of the neutral rate are rising.

Nevertheless, the main message from the dots is one of huge policy uncertainty. 9 FOMC members placed their ‘dot’ above the median, compared to 10 at or below it. Meanwhile, the dispersion of dots was incredibly wide, with 2 Committee members seeing just one more cut this year, in contrast to one policymaker seeking another 100bp of easing before 2024 draws to a close. The FOMC are sure of the direction of travel, but not sure of the speed at which that journey will be taken.

September 2024 FOMC Review: Kicking-Off With A Jumbo Cut_3

In addition to the dots, the SEP also included the FOMC’s latest economic projections. Likely driving the decision to deliver a larger-than-expected 50bp cut was a rather ugly unemployment forecast, with joblessness now expected at 4.4% this year, 0.4pp higher than in June, while remaining at that level into next year, before dropping to 4.3% - still 0.2pp above the prior forecasts – in 2026.

Despite increased labour market slack, the economy is still expected to grow at a solid pace, with real GDP growth of 2% foreseen in each year of the forecast horizon, broadly unchanged from the prior projections. Such growth is set to come against a ‘goldilocks’ backdrop of continued cooling inflation, with core PCE still seen falling to 2.0% by 2026, while headline PCE is set to be within inches of target, at 2.1%, next year.

September 2024 FOMC Review: Kicking-Off With A Jumbo Cut_4

Having digested all of that, participants then had to grapple with Chair Powell’s post-meeting press conference.

During the presser, Powell stressed that policymakers would take a meeting-by-meeting approach to future decisions, framing rate cuts as a “policy recalibration”, which is not on “any preset course”, and which will take place “over time”. Powell also stressed the Fed’s flexibility, being able to go “quicker, slower, or pause” if appropriate, while also flagging that the SEP does not show policymakers rushing to get rates back to a neutral level.

Furthermore, Powell was clear that “no one” should extrapolate from today’s 50bp cut and assume that this is the new pace that the FOMC will follow going forward, even if policymakers are ‘ready and able’ to react if the labour market were to slow unexpectedly.

In reaction to the September FOMC, money markets priced an even more dovish outlook. The USD OIS curve now sees the fed funds rate at 4.5% - i.e., another 25bp cut – in November, around 10bp lower than what was priced prior to the decision. By December, the curve prices the fed funds rate at 4.15%, also around 10bp below its pre-release level. Of course, this pricing is also considerably more dovish than the path outlined in the updated ‘dot plot’.

September 2024 FOMC Review: Kicking-Off With A Jumbo Cut_5

Amid this repricing, markets largely took things in their stride.

Equities initially popped on the 50bp cut, though pared gains as time went on, trading in particularly choppy fashion during the press conference, as Powell stressed policymakers not being “in a rush” to get back to neutral. Treasuries were similarly choppy, with the 2-year yield paring around half of the 12bp advance seen on the policy announcement.

The greenback, meanwhile, was also choppy, with the DXY recovering from a fresh YTD low as the presser progressed, while gold also experienced a rollercoaster ride, paring gains from a new record high just shy of $2,600/oz.

September 2024 FOMC Review: Kicking-Off With A Jumbo Cut_6

On the whole, the ‘jumbo’ rate cut seems unlikely to be a game-changer on its own, even if it is now followed by a series of more modest, 25bp moves. Risk sentiment continues to hinge not on what the Fed will do, but what policymakers can do if required. With rates still approx. 200bp above neutral, plus quantitative tightening likely to wrap up before year-end, the FOMC’s toolbox is full to the brim with potential support measures.

When coupled with the forceful ‘Fed put’ that remains in place, and desire to prevent further weakness in the labour market, investors should remain confident to reside further out the risk curve, with any dips set to remain shallow in nature. Nevertheless, if the FOMC were to plot a quicker path back to neutral, the USD is liable to face relatively stiff headwinds, particularly as other G10 central banks take a much more cautious approach to the normalisation process.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Cryptocurrency

Bitcoin sought to flip $62,000 to support on Sept. 19 as markets digested a rare 0.5% interest rate cut by the United States Federal Reserve.

BTC/USD 4-hour chart. Source: TradingView

BTC price sees three-week highs as Fed cuts big

Data from Cointelegraph Markets Pro and TradingView followed continued Bitcoin price strength during the Asia trading session.

Local highs of $62,600 followed the Fed’s move, which was only the third time in history that a rate-cutting cycle had begun with a 0.5% reduction.

These, in turn, liquidated short BTC positions across exchange order books. Data from monitoring resource CoinGlass put the total for the 24 hours to the time of writing at $128 million.

“Now we need to reduce leverage or take profits,” it told followers on X in a subsequent analysis, warning them not to “get carried away.” Bitcoin Price Hits $62.6K as Fed ‘Crisis’ Move Sparks US Stocks Warning_2

Bitcoin Price Hits $62.6K as Fed ‘Crisis’ Move Sparks US Stocks Warning_2

BTC liquidation heatmap (screenshot). Source: CoinGlass

Previously, Cointelegraph reported on a BTC price prediction calling for $64,000 in the event of a 0.5% cut, which ultimately proved too much for bulls to muster as significant resistance lingered overhead.

“Bitcoin slowly eating its way through the resistance level,” popular trader Jelle reported on X.

“Above $62,500, things will look a lot more constructive, and stops above $65,000 won’t be safe anymore. Going to be an interesting end to September.” Bitcoin Price Hits $62.6K as Fed ‘Crisis’ Move Sparks US Stocks Warning_3

Bitcoin Price Hits $62.6K as Fed ‘Crisis’ Move Sparks US Stocks Warning_3

US Dollar Index (DXY) 1-hour chart. Source: TradingView

The US dollar saw volatile conditions, meanwhile, with the US Dollar Index (DXY) initially also rising before giving up its gains to return to prior support.

“Sitting at the edge of support. Breakdown can result in a sharp move towards 96,” popular trader Aksel Kibar responded in his latest DXY analysis on X. Bitcoin Price Hits $62.6K as Fed ‘Crisis’ Move Sparks US Stocks Warning_4

Bitcoin Price Hits $62.6K as Fed ‘Crisis’ Move Sparks US Stocks Warning_4

US Dollar Index (DXY) 1-month chart. Source: Aksel Kibar/X

For Arthur Hayes, former CEO of crypto exchange BitMEX, attention was now on the Bank of Japan’s own rates decision due on Sept. 20.

The strength of the yen would, in turn, influence BTC price performance, he suggested.

“Something doesn’t add up”

Zooming out, however, trading resource The Kobeissi Letter had a clear warning for risk-asset traders.

While seemingly boosting liquidity, rate-cutting cycles beginning with a 0.5% decrease ultimately result in losses for US equities.

“In 2001, the market fell 31% after 2 years and in 2007 the market fell 26% after 2 years. These were major crises,” part of an X thread recalled.

Kobeissi contrasted the Fed’s upbeat message with the scale of its policy dial-back, suggesting a contradiction in play.

“If the Fed has only started with 50 basis point rate cuts during crises, why start with 50 bps this time?” it queried.

“The Fed continues to say the economy is strong and they are calling for a soft landing. But policy decisions are as if we are in a crisis. Something doesn’t add up here.” Bitcoin Price Hits $62.6K as Fed ‘Crisis’ Move Sparks US Stocks Warning_5

Bitcoin Price Hits $62.6K as Fed ‘Crisis’ Move Sparks US Stocks Warning_5

Fed target rate probabilities. Source: CME Group

Data from CME Group’s FedWatch Tool showed odds of another 0.5% cut being less likely than a smaller 0.25% follow-up at the Fed’s next meeting on Nov. 7.

Source: Cointelegraph

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Stocks

Asian markets forged higher on Thursday after the Federal Reserve kicked off its efforts to prevent a recession in the U.S. with a bigger-than-usual cut to interest rates.

In Tokyo, the Nikkei 225 index jumped 2.1% to 37,155.33, lifted by major export manufacturers’ shares. Toyota Motor Corp. jumped 5.1%, Sony Group Corp. added 2.9% and Hitachi Ltd. advanced 5.8%.

Hong Kong’s Hang Seng gained 1.9% to 17,993.30.

The Shanghai Composite index climbed 0.7% to 2,736.51, while Taiwan’s Taiex was up 1.7%.

South Korea’s Kospi rose 0.2% to 2,579.86.

The Bank of Japan and the Bank of England are also holding monetary policy meetings this week. Neither central bank is expected to move on rates, though the language of what the officials say could be an indicator of later moves and still influence markets.

Because the Fed’s half-percentage point rate cut was so well telegraphed, markets had already climbed in anticipation. So, Wall Street’s reactions to the 180-degree turn on its policy rate were relatively muted.

“Markets barely reacted to the Fed’s 50 (basis point) rate cut, on balance, and our base case is that further cuts won’t move the needle too much either,” Thomas Mathews of Capital Economics said in a commentary.

It was the first cut to the federal funds rate in over four years, ending a stretch where the Fed kept rates at a two-decade high to slow the U.S. economy enough to stifle the worst inflation in generations.

On Wednesday, the S&P 500 slipped 0.3%, closing at 5,618.26. The Dow Jones Industrial Average dipped 0.2% to 41,503.10. The Nasdaq composite lost 0.3% to 17,573.30.

The Fed’s move can help financial markets in two big ways. It eases the brakes off the economy, which has been slowing under the weight of higher rates, and it gives a boost to prices for all kinds of investments. Besides stocks, gold and bond prices had already rallied in recent months on expectations that rate cuts were coming.

Now that inflation has eased significantly from its peak two summers ago and appears to be heading toward 2%, the Fed says it it can turn more of its attention toward protecting the slowing job market and overall economy.

“The time to support the labor market is when it’s strong and not when you begin to see the layoffs,” Fed Chair Jerome Powell said. “That’s the situation we’re in.”

Some critics say the Federal Reserve may have already kept interest rates too high for too long, but Powell said that “We don’t think we’re behind.”

“We think this is timely. But I think you can take this as a sign of our commitment not to get behind,” Powell said in a press conference following the Fed’s announcement.”

“The focus has now decisively shifted to the labor market, and there’s a sense that the Fed is trying to strike a better balance between jobs and inflation,” Stephen Innes of SPI Asset Management

Like stock prices, Treasury yields wavered up and down repeatedly immediately after the Fed announced its cut and published its projections.

Trading in Tupperware Brands remained halted after the company filed for Chapter 11 bankruptcy protection. Its stock has been sinking, down to 51 cents, since a mini-revival early in the pandemic sent its stock above $30.

All told, the S&P 500 slipped 16.32 points to 5,618.26. The Dow dropped 103.08 to 41,503.10, and the Nasdaq composite lost 54.76 to 17,573.30.

In other dealings, U.S. benchmark crude oil lost 20 cents to $69.68 per barrel in electronic trading on the New York Mercantile Exchange.

Brent crude, the international standard, declined 22 cents to $73.43 per barrel.

The dollar rose to 142.58 Japanese yen from 142.29 yen. The euro rose to $1.1132 from $1.1120.

Source: AP

Risk Warnings and Disclaimers

Add to Favorites

FXOpen

Forex

The Federal Reserve surprised the market yesterday by cutting the dollar rate by 0.5%, with expectations that a similar reduction might occur by the end of the year. The dollar initially dropped sharply following the announcement but then partially recovered after comments from Jerome Powell. The Fed Chair stated that the current decision would not dictate the pace for further rate cuts and should help maintain stability in the labour market under current conditions.

Major currency pairs reacted strongly to the Fed’s decision. The GBP/USD pair hit a new high for the year, dropping to 1.3100, while USD/JPY fell to 140.50 before strengthening by more than 200 pips. The USD/CAD pair managed to rise above 1.3600.

USD/JPY

The USD/JPY pair is under dual pressure. On one side, the US regulator is aggressively cutting rates, while the Bank of Japan plans to raise rates after a long period of ultra-low rates. In such conditions, the pair experiences high volatility, with a daily range of 200 pips.

According to technical analysis, the pair is undergoing a corrective pullback after forming a “hammer” pattern on the daily timeframe. Currently, the rise is constrained by a significant resistance level at 144.00. The price has been testing this level for about two weeks, and if buyers fail to hold above it in the upcoming trading sessions, a return to 141.00-140.00 is possible.

Factors influencing USD/JPY include:

Today at 09:00 (GMT +3:00), the release of the Philadelphia Fed manufacturing index (US).

Today at 09:00 (GMT +3:00), the release of initial jobless claims in the US.

Tomorrow at 05:30 (GMT +3:00), the Bank of Japan’s monetary policy report.

USD/CAD

Yesterday, the USD/CAD pair managed to break above 1.3600 and tested the key level of 1.3650. If buyers can maintain the 1.3600-1.3580 range as support, the corrective rise may continue towards 1.3800-1.3700. If the minimum of 1.3440 from yesterday is revisited, the downtrend may resume with renewed strength.

Risk Warnings and Disclaimers

Add to Favorites

Warren Takunda

Economic

The Federal Reserve has made its first rate cut in four years, taking an aggressive stance with a 0.5% reduction, as anticipated by some analysts.

While there is considerable debate over the Fed's next steps in its remaining two meetings this year, the bold start to its easing cycle holds substantial implications for European markets and the euro.

The immediate market reaction and implications on the future

Wall Street ended lower on Wednesday, likely due to a "sell the fact" reaction, as the markets had recently already priced in the Fed's rate cut.

However, risk-on sentiment may be returning, with equities across the Asia-Pacific region rallying on Thursday, and futures pointing to a higher open in both the US and European stock markets.

The euro and the British pound weakened against the US dollar before rebounding, given that the European Central Bank and Bank of England were less dovish than the Fed.

BoE's decision closely watched

The Bank of England's rate decision, due later today, will be closely watched as the bank is set to maintain the policy rate at 5%, compared with the Fed's new range of 4.75% to 5% after the cut.

The Fed's rate cut marks a turning point for global markets, as a lower interest rate environment indicates more liquidity, which could reduce the pressure on other central banks to maintain higher rates.

The European Central Bank is likely to continue with rate cuts, but the key question is how much and how quickly it will proceed for the rest of the year.

If the ECB's pace of rate cuts is slower than the Fed's, the euro could face further downward pressure against the US dollar.

Meanwhile, the dollar's continued weakness could support commodity prices, which would benefit currencies linked to commodities such as the Australian dollar, the Canadian dollar, and the New Zealand dollar.

In terms of asset classes, cash may become less attractive, as banknotes generate lower yields.

Benefits for different sectors

Consequently, so-called "hot money" could return to markets, flowing into equities, commodities, bonds, and property.

In the stock market, sectors exposed to high debt levels, such as small caps, utilities, and property, are likely to benefit from lower interest rates.

This shift could lead investment funds to rotate from large-cap stocks to smaller companies in search of higher returns.

The trend has already emerged on Wall Street this year and is reflected in Europe. As a result, the Euro Stoxx Small 200 index could begin to outperform the Euro Stoxx 50.

Additionally, commodity-related assets such as growth-sensitive industrial metals and energy, particularly crude oil and copper, are worth watching.

The recent underperformance of mining and energy stocks in Europe could present an opportunity for recovery.

Why did the Fed go big with the first cut?

The first jumbo rate cut signalled that the Federal Reserve had kept rates at elevated levels for too long, falling behind most other central banks.

There appears to be an urgency to reduce interest rates rapidly to prevent further deterioration in the US labour market.

Recent data shows a rising trend in unemployment, which could negatively affect consumer spending and economic growth.

The committee raised its median projection for the unemployment rate to 4.4% by the end of the year, up from the previously forecasted 4%.

In its post-meeting statement, the Fed indicated that risks to employment and inflation are now roughly balanced, and it remains strongly committed to supporting maximum employment.

However, the jumbo rate cut wasn't driven by rising risks of an economic downturn or recession.

A soft landing for the economy is still considered achievable, according to recent economic data.

Fed Chair Jerome Powell stated: "I don't see anything in the economy right now that suggests the likelihood of a downturn is elevated."

The Fed's aggressive "front-loading" approach to start the easing cycle isn't expected to set the pace for future decisions, which will be made on a "meeting-by-meeting" basis.

The Fed's Dot Plot (decision makers estimates for future interest rates) indicates a further 0.5% cut in 2024 and a full percentage cut in 2025.