Will the Rally Survive Next Week’s Fed Cut?

US equities closed at record highs on Thursday as investors positioned ahead of next week’s highly anticipated Federal Reserve policy decision. The Dow Jones surged past 46,000 for the first time, while the S&P 500 and Nasdaq also posted solid gains. The rally was driven by expectations that the Fed will cut rates for the first time in nine months, a move seen as necessary to support slowing economic growth.

The final inflation data before the meeting came in slightly hotter than expected, with headline CPI up 0.4% MoM and 2.9% YoY, but softening labour market data has kept markets confident that easing is coming. Fed funds futures now price in a 92.5% probability of a 25bps cut, with a small but growing chance of a 50bps move.

Market Highlights

US 10-year Treasury yield dipped below 4% intraday before closing at 4.03%, the lowest in five months.
S&P 500 +0.85%, led by Materials (+2.14%) and Healthcare, while Energy lagged slightly (-0.04%).
Gold held near record highs at $3,633/oz, up nearly 40% YTD, while oil prices dropped on oversupply concerns.
Brent crude fell -1.92% to $66.27, WTI -2.95% to $61.87.

Corporate Movers

Warner Bros. Discovery jumped +29% on takeover rumours involving Paramount Skydance.
AbbVie rallied +4.1% after a key drug exclusivity deal.
Adobe beat earnings expectations and raised guidance.
Boeing fell after warning of further delays to its 777X aircraft programme.

European Perspective

European markets followed Wall Street higher:

FTSE 100 +0.78%
DAX +0.30%
CAC 40 +0.80%

The ECB held rates steady at 2.0%, with President Christine Lagarde signalling a data-dependent approach and a positive outlook on growth and inflation. However, bond spreads in France widened slightly, highlighting ongoing political risk.

FX and Crypto

The US dollar softened, reflecting easing expectations:

EUR/USD +0.31% to 1.1733
GBP/USD +0.33% to 1.3572
Bitcoin +0.69% to $114,526
Ethereum +2.03% to $4,429

What This Means for Wealth Managers and Accountants

For firms managing high-net-worth portfolios, the key question is whether this rally has legs:

Equities are priced for perfection.
A 25bps cut is almost fully priced in. Any deviation — either no cut or a surprise 50bps — could trigger sharp volatility.
Fixed income is back in play.
With yields retreating, this may be a window to rebalance toward quality bonds, especially for clients focused on capital preservation.
Commodities offer diversification.
Gold remains a strong hedge, while oil’s decline reflects slowing demand — potentially signalling softer global growth ahead.
Currency positioning matters.
The weakening dollar favours USD-hedged strategies and could benefit European and UK equity allocations.

Bottom Line

Next week’s Fed decision is the most critical event of the quarter. With stocks at record highs and gold near peak levels, the risk/reward balance is delicate. For wealth managers and accountants advising HNW clients, now is the time to review allocations, lock in gains where appropriate, and prepare for potential policy surprises.

Stay alert: the music is still playing — but when the Fed cuts rates, the tempo could change fast.