JPMorgan maintains a 'Tactical Bullish' outlook but warns that the Federal Reserve's expected 25bp interest rate cut on September 17 could trigger a 'Sell the News' market pullback, driven by concerns over macroeconomic data, stretched market positioning, and a potentially weaker corporate buyback bid.

JPMorgan Cautions on Potential Market Pullback Amidst Anticipated Federal Reserve Rate Cut

Executive Summary

U.S. equity markets face a period of heightened uncertainty, as JPMorgan has issued a warning that the Federal Reserve's widely anticipated 25-basis-point (bp) interest rate cut on September 17 could precipitate a "Sell the News" event, potentially leading to a market pullback. While the bank maintains a "Tactical Bullish" outlook, it advises investors to consider hedging strategies amidst concerns over macroeconomic data, the Fed's reaction function, potentially stretched market positioning, a weaker corporate buyback bid, and waning retail investor participation.

The Anticipated Rate Cut and JPMorgan's Warning

The financial community broadly expects the Federal Reserve to implement a 25 bp reduction in the federal funds rate at its upcoming Federal Open Market Committee (FOMC) meeting on September 17. This expectation is significantly influenced by recent economic indicators, including a deceleration in hiring as evidenced by the August jobs report, which saw nonfarm payrolls increase by only 22,000. Additionally, weekly jobless claims rose to 263,000, marking the highest level in nearly four years.

JPMorgan's Chief U.S. economist, Michael Feroli, articulated the bank's revised forecast, stating:

“For Fed chair Jerome Powell, the risk management considerations at the next meeting may go beyond balancing employment and inflation risks, and we now see the path of least resistance is to pull forward the next cut of 25 basis points (bp) to the September meeting.”

Despite the S&P 500 reaching over 20 all-time highs this year and gaining more than 10% year-to-date, JPMorgan's trading desk, led by Andrew Tyler, cautions that the market may have already fully priced in the expected rate cut, leaving limited room for further upside.

Analysis of Contributing Factors and Market Dynamics

JPMorgan's warning is predicated on several critical factors. The bank highlights a re-evaluation of macroeconomic data, noting that while weak economic data has historically fueled rate cut hopes (the "bad news is good news" mantra), this may not hold true in the current environment. Inflation remains above the Fed's 2% target, with Personal Consumption Expenditures (PCE) rising 2.6% year-over-year in July, and the Producer Price Index (PPI) and Consumer Price Index (CPI) increasing by 3.3% and 2.7% respectively over the last 12 months. Core CPI stands at 3.1%.

Concerns also revolve around the Fed's reaction function—how the central bank will adjust its policy based on evolving economic data, particularly its tolerance for inflation versus its focus on supporting the labor market.

Market positioning appears stretched, with "above average, but declining" exposure to U.S. stocks among institutional investors, and hedge funds observed as "small sellers" in North America and Asia Pacific. While S&P 500 companies recorded a record $293 billion in buybacks in the first quarter of 2025, there are indications of a weaker corporate buyback bid recently, according to Goldman Sachs.

Furthermore, waning retail investor participation is noted as a concern. While retail investors poured a record $155 billion into U.S. stocks and exchange-traded funds (ETFs) in 2025 and accounted for approximately 20.5% of daily U.S. equity trading volume in mid-2025, JPMorgan's warning suggests a potential decline in momentum from this cohort, who have historically been significant "buy-the-dip" forces.

Broader Context and Investment Implications

Historically, more than half of the Federal Reserve's first rate cuts since 1970 have been followed by declines exceeding 20% in the S&P 500, underscoring the challenge of achieving a "soft landing." The potential for rate cuts to exacerbate an already frothy market and inflate asset bubbles is a consideration.

The current market exhibits elevated valuation multiples, with the S&P 500's forward price-to-earnings (P/E) ratio around 22.5, which is above historical norms. Additionally, the top 10 stocks comprise almost 40% of the index's value, indicating a significant concentration risk. September has also historically been one of the weakest months for U.S. equities.

For investors, JPMorgan suggests considering or increasing gold exposure as a hedge against potential market volatility. This recommendation stems from the traditional inverse relationship between the U.S. dollar and gold prices; anticipated rate cuts could lead to a weaker U.S. dollar, thereby making gold more attractive. The price of gold recently reached a new all-time high above $3,640 and JPMorgan Research projects prices to average $3,675 per ounce by the fourth quarter of 2025, climbing towards $4,000 per ounce by mid-2026. This sentiment is echoed in bond markets, where U.S. Treasury yields have plummeted to five-month lows, with the 10-year yield falling to 4%, indicating investor anticipation of lower rates and a flight to safer assets.

David Kelly, Chief Global Strategist at JPMorgan Asset Management, warns that the Fed's likely "preemptive" rate cuts could risk reigniting inflation:

"The Fed’s likely ‘preemptive’ rate cuts, as warned by David Kelly, Chief Global Strategist at JPMorgan Asset Management, could risk reigniting inflation and inflating asset bubbles."

Looking Ahead

The market's immediate focus will remain on the Federal Reserve's September 17 decision and its subsequent guidance. Key economic data, particularly the upcoming September CPI report, will be crucial in shaping market expectations and influencing the Fed's future policy trajectory. The central bank faces a delicate balancing act in adhering to its dual mandate of maximum employment and stable prices. While a cooling labor market might necessitate easing to prevent an economic downturn, persistent inflation above target and potential new price pressures from factors like trade tariffs complicate the decision-making process. Investors should prepare for continued volatility as the market navigates these complex dynamics.

source:

[1] JPMorgan warns Fed rate cut could become ’Sell the News’ event[2] What's The Fed's Next Move? | J.P. Morgan Research[3] Why JPMorgan is warning the Fed rate cut everyone expects could sink stocks - Morningstar

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Icometrix's technology also includes icobrain ms, which has demonstrated an ability to reduce intra- and inter-rater variability in lesion counting, increasing sensitivity for detecting subclinical disease activity to 76% compared to standard radiological readings. Analysis of Market Reaction and Financial Position GE HealthCare, with a market capitalization of $35.94 billion, maintains a robust financial position. The company reported $19.97 billion in revenue over the last twelve months and a strong gross profit margin of 41.56%. Funding for the Icometrix acquisition will be derived from GE HealthCare's cash on hand, minimizing debt exposure. As of Q2 2025, the company held a cash balance of $3.8 billion and a current ratio of 1.16, indicative of strong liquidity. 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