The Dovish Fed Playbook

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Markets are betting big on Fed rate cuts — with September odds split between a 25bp trim and whispers of a jumbo 50bp move. Softer CPI data fuelled dovish bets, but today’s PPI report could throw cold water on the frenzy if tariff-led costs push prices higher. Bond yields are testing recent lows, the dollar is down for a third straight session, and Bitcoin’s at fresh records. US stocks hit new highs, with small- and mid-caps rallying on lower-rate hopes, while Nvidia slipped after CoreWeave’s bigger-than-expected loss. Abroad, the Nikkei fell on BoJ hike talk, but Japanese tech still looks appealing. Chinese equities shine with Tencent and Alibaba’s AI-driven growth powering the Nasdaq Golden Dragon China index nearly 30% higher since April. Is the market underestimating inflation risks — and could an outsized cut backfire?
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