KUALA LUMPUR, Dec 5 (Bernama) -- Bursa Malaysia closed lower on Friday amid mixed regional market performance as investors turned cautious over a possible rate hike by the Bank of Japan (BOJ) and upcoming US economic data that may influence the Federal Reserve’s (Fed) interest rate decision next week. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) pared most earlier losses to settle 4.55 points easier, or 0.28 per cent, to 1,616.52 from Thursday’s close of 1,621.07. The benchmark index, which opened 0.37 of-a-point lower at 1,620.70, moved between 1,609.67 and 1,621.25 throughout the day. The broader market was negative, with decliners outpacing advancers 604 to 439. A total of 550 counters were unchanged, 1,151 untraded, and 18 suspended. Turnover declined to 3.17 billion units worth RM2.24 billion from 4.48 billion units worth RM2.75 billion yesterday. Rakuten Trade Sdn Bhd vice-presiden...
History Backs a Bullish Setup
The Federal Reserve looks set to cut rates in September after holding steady since December 2024. History suggests that such pauses often precede strong equity rallies: the S&P 500 gained in 10 of the last 11 instances when the Fed waited 5–12 months before easing again.
Investor psychology: The pause may have allowed markets to reset, with optimism returning as the Fed turns dovish.
Powell’s signal: The Fed chair hinted Friday that labor market concerns now outweigh inflation risks, fueling expectations of easing.
Market Expectations
September cut odds: 85% chance of a 25bps cut, up from 75% last week (CME FedWatch).
Multiple cuts priced in: Markets see ~84% probability of at least two cuts this year with three meetings left (Sept, Oct, Dec).
Current market moves:
Dow: +1.5% (record close)
S&P 500: +0.3%
Nasdaq: –0.6% (tech lagging)
What Could Change the Fed’s Path?
Key reports ahead:
July PCE (inflation gauge) – next week
August jobs report – early Sept
CPI and PPI – right before the Sept meeting
Analysts say only an exceptionally hot inflation print could derail the cut.
Labor market weakness is now the Fed’s primary concern.
Where the Rally Could Spread
Small-caps: Russell 2000 surged +3.9% Friday, outpacing S&P 500. Smaller firms, with more floating-rate debt, are highly sensitive to lower borrowing costs.
Growth stocks: Traditionally benefit from easing, but stretched valuations could cap gains.
Broader risk appetite: Lower rates often push investors beyond large-cap tech into cyclicals, financials, and real estate.
Risks & Pushback
Market euphoria: Analysts warn sentiment may be overheated.
Fed divisions: Cleveland Fed President Beth Hammack has pushed back, saying she would not support a September cut with current data.
Valuation concerns: Extended rallies without earnings support could invite correction.
Key Takeaways for Investors
High odds of Sept rate cut: Markets almost fully priced for 25bps; debate may shift to 50bps or October follow-up.
Historical precedent favors bulls: Fed pauses before cuts often precede strong rallies.
Rotation opportunity: Small-caps and cyclicals may lead if rates drop, while big tech faces valuation headwinds.
Data still critical: Inflation and jobs reports in coming weeks remain the swing factors.
Stay cautious of euphoria: Market sentiment is strong, but divisions within the Fed signal uncertainty.
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