Bank of America warns that dovish rate cuts by the Federal Reserve could end the stock market rally

The US Federal Reserve's overly cautious approach to the economic outlook could jeopardise a year-end rally in equities, Bank of America strategists have warned. As the S & P 500 nears record highs, investors are hoping for the best-case scenario in which the Fed cuts interest rates as inflation falls while the economy remains resilient. But Michael Harnett, BofA strategist, noted that such optimism would be tested if the Fed sent a dovish signal at next week's meeting, as it could signal a sharper-than-expected slowdown. "The only thing that could kill the'Christmas market 'is a dovish rate cut triggering a sell-off in long-term bonds," Mr. Harnett wrote in his note, referring to longer-dated US Treasuries. (Golden Ten)