The Federal Reserve is widely expected to cut interest rates this week. Experts and market watchers are closely watching to see how this could impact stocks, cryptocurrencies, and broader economic trends.
In an interview with CNBC, Fundstrat’s Tom Lee highlighted which sectors could benefit significantly from the Fed’s move.
Lee pointed to historical patterns, and said that he is looking at September ’98 and September 2024 as the playbook, as those were the years where the Fed was on extended pause and then cut in September.
“The Standout Trades”
His top pick is the NASDAQ 100: “That’s why the MAG 7 and the AI trade gets a lot of liftoff,” he said. Secondly, he highlighted cryptocurrency, pointing out the impact of global central bank easing. “That’s Bitcoin and Ethereum and seasonally strong. I think they could make a monster move in the next three months.”
He also mentioned interest-rate-sensitive sectors, saying that small caps and financials could also benefit from the rate cuts. However, he emphasized that NASDAQ 100 and crypto, might be the standout trades.
Trump Calls For Bigger Rate Cut
Despite repeated calls from President Trump, the Fed takes a cautious, wait-and-watch approach to assess the impact of higher tariffs on the economy. In a recent post on Truth Social, President Trump yet again called out Fed Chair Jerome Powell to implement a “bigger” and immediate interest rate cut, citing the housing market as a key reason.
How Markets Could React
The Fed is expected to cut rates on Wednesday for the first time in 2025, citing a weakening labor market, even as GDP growth remains strong and inflation stays hot.
The Kobeissi letter notes that this is a rare scenario, just the third time since 1996 that rate cuts coincide with the S&P 500 at record highs, which has historically led to strong gains over the following year.
While short-term volatility is possible, the combination of lower rates, robust growth, and the ongoing AI-driven technological revolution is expected to fuel long-term gains in stocks, gold, and Bitcoin.
Bitcoin Braces for Volatility
According to Investor Ted Pillows, the Fed is set to cut rates in just two days, and analysts like JP Morgan expect the market to see a short-term dip before bouncing back.
For Bitcoin, there are two possible scenarios: it could drop to around $104,000 before reversing, or fall further to $92,000, which aligns with a CME gap, before making a push toward a new all-time high.
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