However, it could be a classic case of “buy the dip,” especially if trigger events like a rate pause or a tangible trade agreement between the United States and China boost the markets. On the topic of the former, a more dovish Fed can certainly help that cause.
“Signs of capitulation by institutional investors are creating a window of opportunity for equity markets into Q1 assuming the Fed reacts to market stress,” J.P. Morgan analyst Nikolaos Panigirtzoglou said in a note to investors on Friday.
However, the lack of a positive trigger event could cause markets to resume their downward trajectory of the past few months.
“If such dovish shift does not materialize and the yield curve inversion fails to improve, any equity rally in Q1 would most likely be short lived,” Panigirtzoglou added.
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