Fed Rate Cut “Imminent” as Global Asset Classes Prepare for Value Recalibration

A convergence of economic indicators has led markets to conclude that a Federal Reserve rate cut is all but certain. After August’s nonfarm payrolls rose by only 22,000—down sharply from July’s revised 79,000—and the unemployment rate climbed to 4.3%, investors have fully factored in a September reduction in borrowing costs.

The CME FedWatch Tool currently assigns an 89% probability to a 25-basis-point cut and an 11% chance of a 50-basis-point move, mirroring the Fed’s September 2024 decision to launch its easing cycle with a half-point cut. In 2024, three consecutive rate reductions totaled 100 basis points, but the Fed has held rates steady since the start of 2025. Ming Ming, Chief Economist at CITIC Securities, observes that today’s labor market weakness recalls last September’s conditions and underscores the case for a cut, though tariff-fueled inflation risks make a smaller, 25-basis-point move more likely.

The Minyin Research Team concurs, noting that an aggressive 50-basis-point cut could spark fresh questions about the Fed’s independence, signal deeper recessionary pressures, and exacerbate market swings. They argue that a preemptive, modest easing will stimulate demand without unduly unsettling financial markets.

With rate-cut expectations heating up, attention has turned to how various asset classes will respond. Historically, easing cycles boost liquidity and risk appetite, lower the market’s interest-rate pivot, and tend to lift U.S. equities and Treasuries while dampening the dollar index, according to Wang Youxin, Director at the Bank of China Research Institute. Yet experts warn that each cycle unfolds against its unique backdrop.

Research from China International Capital Corporation highlights that preemptive cuts typically require fewer total moves and tend to shift asset valuations quickly from a liquidity-driven framework to one focused on fundamentals. Ming Ming adds that if the Fed’s cut aligns with or leads the economic slowdown, U.S. markets may react positively; but if easing is viewed as a belated response to downturn risks, the initial impact could be negative across both domestic and global markets.

Investors have already begun repositioning: equity markets and commodities such as gold and copper have shown early responses to anticipated easing. Gold, in particular, has outperformed in the early stages of past rate-cut cycles, says Wang Xinjie, Chief Investment Strategist at Standard Chartered China Wealth Management, driven by swift declines in U.S. Treasury yields ahead of Fed moves. Looking ahead, as the dollar’s siphon effect weakens and the narrative of American exceptionalism recedes, global capital may increasingly seek higher returns in non-U.S. assets.