Central banks provide reprieve for stock markets
Stock markets are rebounding again on Tuesday, an encouraging sign at a time when sentiment has appeared to have been significantly harmed by tariffs.
Source – Thomson Reuters Eikon 
Perhaps we have central banks to thank for the bounce over the last couple of days, with the RBA cutting interest rates to record lows – in line with expectations – overnight and a Fed official suggesting a cut may be warranted soon. James Bullard is one of the most dovish members of the Federal Reserve, so his comments should perhaps not come as too great a surprise, but he is a voter this year so maybe carry a little more weight.
It may just also be an overreaction at a time when the market seemed to only be headed in one direction. At times, it seems traders are looking for any reason to take a little profit off the table and maybe this is the reason to do so. The important thing though is that we have seen a clear shift from the Fed over the course of this year and talk of a rate cut is in line with what markets were already factoring in.
While the risks are building and sentiment becoming increasingly fragile, I still feel the markets are getting a little ahead of themselves. Markets are now pricing in more than an 80% chance of two rate cuts this year and have a third as a coin toss. That strikes me as being quite extreme even given expectations for the economy for the rest of the year and risks that exist. Could be a rough few months if markets are correct.
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