Loosening Policy 

September was a positive month for global stock markets. The Federal Reserve cut interest rates by 50 basis points to 5.00%, a move considered beneficial for the U.S. economy. The Fed is likely front-loading the rate cuts to allow the economy to fully experience the effects of the monetary shift. Historically, large rate cuts have sometimes led to recessions, but this time it is expected that the rate reduction will help guide the slowing U.S. economy toward a soft landing rather than a recession. While the economy is decelerating, the slowdown isn’t seen as alarming.

Meanwhile, the People’s Bank of China (PBoC) is implementing monetary stimulus to support China’s economy. The central bank has introduced an RMB 800 billion (USD 114 billion) fund aimed at boosting the stock market, providing loans to asset managers, insurers, brokers, and listed companies for stock buybacks. Additionally, PBoC has introduced measures such as cuts to benchmark interest rates, mortgage rates, and down payment requirements.

More central banks are stepping in with stimulus as inflation returns to normal levels. This presents a favourable environment for global stock markets to continue performing well, as monetary and fiscal policy can keep the growth momentum of their respective economies.