Aberdeen Investment: The Federal Reserve has not committed to a rate cut in December, and market focus shifts to China-U.S. trade negotiations
On October 30th, the Federal Reserve announced a 0.25% interest rate cut, lowering the target range for the federal funds rate to 3.75%-4%. Ray Sharma-Ong from Aberdeen Investments stated that market attention will shift to corporate earnings and the upcoming China-U.S. trade negotiations in South Korea, which are expected to impact market sentiment in 2025. The negotiations will involve key issues such as chip export controls and rare earth supply. The Federal Reserve did not clarify whether there will be another rate cut in December, as the government shutdown has limited access to economic data. Powell's hawkish remarks triggered a negative market reaction
According to the Zhitong Finance APP, in the early hours of October 30, the Federal Reserve announced a 0.25% interest rate cut, marking the second consecutive rate reduction this year, with the federal funds rate target range lowered to 3.75% to 4%. Ray Sharma-Ong, Global Deputy Head of Multi-Asset Client Solutions at Aberdeen Investments, stated that Powell's remarks indicate that the Federal Reserve expects the U.S. government shutdown may last until December this year. Once the U.S. government shutdown ends and macroeconomic data is released again, it is expected to support a rate cut in December. With the conclusion of the Federal Reserve meeting, market attention will shift to corporate earnings and the upcoming U.S.-China trade negotiations in South Korea.
Ray Sharma-Ong believes that the U.S.-China trade negotiations taking place today are expected to impact market sentiment in November 2025. The two sides will discuss a range of key issues, including chip export controls, rare earth supply, tariff structures, fentanyl-related measures, and trade in key commodities such as soybeans and NVIDIA. The finalized TikTok deal will also be one of the negotiation topics. Progress in these areas may boost the U.S. stock market, as well as the overall Chinese market and the Chinese technology sector.
He stated that the Federal Reserve, by cutting rates by 25 basis points, emphasizes that it is not influenced by political pressure, showing that its decisions are still dominated by economic conditions rather than political factors. At the same time, the Federal Reserve acknowledges that the ongoing government shutdown limits its access to economic data. Due to the lack of clear economic information, the Federal Reserve has not provided explicit forward guidance on whether it will cut rates again at the December meeting.
He mentioned that the Federal Reserve announced that quantitative tightening will end on December 1, 2025, and the reinvestment of mortgage-backed securities (MBS) will shift to government bonds starting on the same day. This timeline disappointed the market, which had previously expected an earlier implementation in November 2025. Powell's hawkish tone at the press conference triggered negative reactions in the stock and interest rate markets, reinforcing the notion that "bad news is good news"—weak economic data may prompt the government to further ease monetary policy, thereby supporting the stock market.
He believes that the U.S. government shutdown, combined with recent corporate earnings releases, has intensified market concerns about challenges related to layoffs and hiring. The labor market appears to be in a volatile state, and once economic data reports are released again, employment data may be weak. Meanwhile, due to limited data and the Federal Reserve not yet committing to a rate cut in December, short-term interest rates should remain high, thereby supporting the U.S. dollar. This environment is unfavorable for small and medium-sized stock companies, as they tend to hold a higher proportion of floating-rate bonds
