Recently, after the Federal Reserve cut interest rates as scheduled, investors' focus has changed. What I am most concerned about now is not "whether it will fall", but whether the US economy can stabilize and let the stock market continue to rise at historical highs?

In this rate cut, Federal Reserve Chairman Powell successfully persuaded divided policymakers to push for Wednesday's decision to cut interest rates. The market generally believes that this is just the beginning - there may be three more rate cuts by March next year.

But beware: ≠ interest rate cut, the stock market immediately rose.

Although the cost of borrowing money has become lower, which is good for the economy and the market, whether this benefit can be effective quickly depends on the situation in the next few months. The real key is that everyone must believe that the economy will not have a "hard landing" (that is, fall into recession). Only when everyone feels that "the economy is fine" will they dare to continue to invest money in the stock market and push the stock price higher.

A new survey from Bank of America shows that 67% of fund managers believe the economy will have a "soft landing" (a mild slowdown, no problem); 18% think it will "not land" (not slowing down at all, continuing to grow); Only 10% fear a recession.

This general optimism is currently supporting the stock market. But it also poses a risk: if economic data suddenly deteriorates in the next month, such as declining employment and weak consumption, it may break this optimistic expectation and trigger a correction or even a decline in the market.

Historical experience: Stock markets perform better when there is no recession

A report led by Beata Manthey pointed out that historically, when the Fed cuts interest rates, global and European stock markets usually benefit, like a "tailwind". Moreover, if there is no recession after the rate cut, the stock market tends to perform stronger.

Barclays strategist Emmanuel Cau studied the past seven Fed resumption of interest rate cuts after a long pause and found that. After four interest rate cuts, the economy still declined, and the stock market also fell; But three times the economy continued to grow, and the stock market rose well.

Cau believes that this time it is more likely to fall into the latter scenario. "We don't think there will be a recession, and judging by the performance of the stock market, investors clearly think so," he said. He expects that European stock markets may outperform the global market next. Because in similar situations in the past (such as 1984, 1995, 1998), when the US cut interest rates but the economy did not recession, European stocks not only rose better on their own, but also rose more than US stocks.

The background of this rate cut is different from before: in the past 20 years, most of the Fed's interest rate cuts have been "fire-fighting" - the economy has gone wrong and has to be cut. But this time, although the U.S. job market has weakened a bit, the overall economy is still stable.

The short-term outlook is questionable, and the width of the market is worrying

Despite the overall optimism, many market participants are cautious about the short-term trend and begin to worry about whether this wave of rise is healthy?

1. After the interest rate cut, the stock market may not rise immediately

First of all, the "immediate" effect of interest rate cuts is actually not that strong. Historical data shows that within a month of the first rate cut after the Fed paused interest rate hikes for a long time, the S&P 500 index did not rise or even fell about half of the time. However, if you look at it a year later, the stock market usually performs much better.

2. Where does the upward momentum come from?

Goldman Sachs trader Bobby Molovi asked a key question: "Next, what else can we rely on to continue to rise?" He believes that the market has actually almost digested the "good interest rate cut" in advance - this wave of rise has been going on for some time since August.

The problem now is: institutional investors have already held heavy positions; trend funds (CTAs) are also chasing the rise; retail investors are enthusiastic and entering the market; but at the same time, the rate of company repurchases is slowing down; and the stock price is no longer cheap. In other words: there are more buyers, but the momentum is weakening

3. Only a few winners are rising, and most stocks are left out

Molavi also warned of a red flag - the current market rally is almost entirely driven by a few "star stocks". For example, the "Big Seven" (Apple, Microsoft, Nvidia, etc.); blue chips with a large market capitalization; A leading company in the field of AI.

Most other stocks are either standing still or less and less paying attention. This phenomenon of "only speculating on the leader and snubbing the rest" shows that the market is not healthy - the range of rise is too narrow, and the risk is more concentrated.

Strategists call for "expanding" the investment landscape

Faced with the uncertainty of the U.S. economy and the risk of the stock market being overly concentrated on a few tech giants, some investment strategists suggest: don't just focus on the United States, look a little farther and look at the global market.

Historically, global stock markets have generally benefited as long as the Fed starts cutting interest rates (i.e., "releasing water"), a team of strategists at Société Générale (led by Alain Bokobza), - not only the United States, but also other countries. They advised investors to "diversify and expand their scope" and not just bet on the United States.

Moreover, the market performance in 2025 has proven that if the same currencies are compared, the gains of non-US stocks (such as Europe, Japan, emerging markets) can already compete with US stocks, and sometimes even better.

Citi strategists also believe that European stocks may outperform the United States as investors begin to look for new opportunities. This is consistent with past experience: European stocks tend to perform better when the Fed cuts interest rates but the U.S. economy does not fall into recession - not only by themselves, but also by more than the United States.

Jingtai advises everyone not to put all their eggs in the basket of "America". Now that the Fed has cut interest rates, there are opportunities in global markets, especially stocks in Europe and other countries, which may become the next "potential stocks".

Smart investors have begun to "look outward".