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Conjoined Twins: Bull Market and a Dovish Federal Reserve

The overwhelming consensus is that the Federal Open Market Committee meeting on July 30-31 will reduce the Fed funds rate. A Reuters poll shows 95% of economists are anticipating that and the CME futures market implies 100% probability of at least a 25 basis points reduction to 2-2.25%. So what happens next?

My colleague Tom Lee wrote last week that a market "blast off" occurs when the Fed cuts and US isn’t in recession. Well folks, it seems pretty unlikely we're in the midst of a recession. And the average return of the S&P 500 index over the six months following one of those non-recessionary cuts is 13.5% and 16.5% over 12 months.

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