How the Fed might – or might not – affect the markets

Our view that Treasury yields will fall back a bit and that the US dollar will generally weaken by the end of the year rests on the assumption that the Fed will deliver more rate cuts than currently discounted in money markets. So these forecasts are highly reliant on what the Fed will actually deliver, and therefore on the outlook for inflation and economic activity in the US. By contrast, our bullish view about the US stock market is quite independent from Fed policy.