Multiple signs indicate that the Federal Reserve's interest rate cut is "imminent." Driven by factors such as weak U.S. employment data, the market has fully priced in the Fed's resumption of rate cuts in September.

If the Fed's rate cut "materializes," global major asset classes are poised for a new round of structural adjustments. The performance of various assets will closely revolve around global capital flows, leading to divergent trends. For U.S. dollar-denominated assets, the Fed's rate cuts are generally favorable for U.S. stocks and bonds but negative for the U.S. dollar index. For non-U.S. dollar assets, the rate cuts will diminish the attractiveness of dollar-denominated assets, driving a global reallocation of capital.

Market Fully Prices in Fed Rate Cut in September

Recent data released by the U.S. Department of Labor showed that non-farm payroll employment increased by only 22,000 in August, a significant drop from the revised 79,000 in July and far below market expectations. The unemployment rate rose by 0.1 percentage points to 4.3% month-on-month, hitting a nearly four-year high.

The weak employment data solidified expectations for a Fed rate cut in September, with some market participants even betting on a 50-basis-point cut. According to the CME FedWatch Tool, the market has fully priced in a September rate cut, with an 89% probability of a 25-basis-point cut and an 11% probability of a 50-basis-point cut.

This inevitably recalls the situation in September of last year: against the backdrop of a significant cooling in the job market, the Fed initiated the current rate-cutting cycle with a 50-basis-point cut. In 2024, the Fed implemented three rate cuts, totaling 100 basis points. Since 2025, the Fed has maintained a "wait-and-see" approach.

As the Fed's September policy meeting approaches, will a rate-cutting script identical to last year's play out? "The current U.S. job market is indeed similar to that of September last year, showing clear signs of overall weakness. A Fed rate cut in September is necessary, and there is a possibility of a 50-basis-point cut," Ming Ming, chief economist at CITIC Securities, told the Shanghai Securities News. However, considering the uncertainty surrounding tariffs' impact on inflation, a 25-basis-point cut in September is more likely.

The Minyin Research Team analyzed in a report that a 25-basis-point cut in September is more probable. First, at a time when the Fed's independence is under scrutiny, a direct 50-basis-point cut could raise further doubts about its independence, affecting the long-term credibility of the U.S. dollar. Second, imminent evidence of a recession remains to be verified. Third, potential inflationary risks add constraints to rate cuts. Fourth, a direct 50-basis-point cut could signal that the Fed has observed more signs of a recession, amplifying market volatility through heightened anxiety.

Global Major Asset Classes to Face Adjustments

As expectations for a Fed rate cut intensify, discussions about asset performance post-rate cut are increasing. "Historical experience shows that Fed rate cuts typically improve market liquidity and risk appetite, lower interest rate benchmarks, benefit U.S. stocks and bonds, and negatively impact the U.S. dollar index," said Wang Youxin, head of the Institute of Bank of China, in an interview with Shanghai Securities News.

However, history does not simply repeat itself. Industry insiders believe that while the performance of major asset classes in past rate-cutting cycles can provide references for post-rate-cut trends, current macroeconomic conditions must also be considered.

It is understood that Fed rate cuts can be categorized into two types: preventive cuts, implemented when signs of economic slowdown appear to prevent a recession, and relief cuts (recession-style cuts), implemented when the economy is in recession or facing a major crisis to provide emergency relief.

The current rate-cutting cycle remains preventive. China International Capital Corporation (CICC, stock code: 601995) noted in a research report that as a preventive measure, rate cuts can quickly boost demand, meaning fewer cuts are needed. This also implies that asset trading logic will soon shift from the denominator (liquidity easing) to the numerator (economic recovery).

Wang Youxin stated that if the Fed cuts rates for preventive purposes, synchronizing with or slightly ahead of market trend changes, the short-term impact on U.S. financial markets would be more positive. If the cuts are aimed at addressing a recession or avoiding a hard landing, or if they are perceived as lagging behind market conditions, the short-term impact on U.S. and global financial markets would be more negative.

Ming Ming noted that historical experience shows that under the influence of the Fed's accommodative monetary policy, global major asset classes often benefit from liquidity expansion and perform well. "Since market expectations for a September rate cut are already well-priced in, global equity assets and commodities such as gold and copper have already reacted. The key now is whether the September policy meeting will provide clearer guidance on future rate cuts," he said.

For gold, it has typically performed well in past rate-cutting cycles. However, as gold has already accumulated significant gains, sustained upward momentum requires further catalysts. Wang Xinjie, chief investment strategist at Standard Chartered China Wealth Management, told Shanghai Securities News that based on the past five rate-cutting cycles, gold has a high success rate. In terms of return patterns, most of gold's performance occurs before and in the early stages of rate cuts. The main reason is that U.S. Treasury yields decline rapidly ahead of rate cuts and fluctuate as expectations for future economic growth rebound.

From a market perspective, the Fed's resumption of rate cuts in September is "imminent," and global capital may flow into non-U.S. dollar assets in search of higher returns. Wang Xinjie stated that as the dollar's "siphon effect" weakens and U.S. "exceptionalism"收敛 (converges), some liquidity will seek allocation in assets from other regions, increasing the attractiveness of non-U.S. dollar assets.