The era of high interest rates comes to an end: Global central banks start interest rate cut competition, investors closely watch market new trends

This autumn, major central banks around the world are preparing to start or continue cutting interest rates, ending an era of historically high borrowing costs.

In September this year, the Federal Reserve is almost certain to join the ranks of the European Central Bank, the Bank of England, the People's Bank of China, the Swiss National Bank, the Swedish Riksbank, the Bank of Canada, the Bank of Mexico, etc., in cutting key interest rates. These rates have been at unprecedented highs since before the 2007-2008 financial crisis.

The currency market has long reflected the Fed's rate cut expectations, but last week investors' confidence in the future easing path further strengthened.

At the annual Jackson Hole Symposium, Federal Reserve Chairman Jerome Powell not only stated that "the time for policy adjustment has come," but also mentioned that the central bank can now also focus on maintaining a strong labor market and continuing to address inflation.

According to data from CME's FedWatch tool, current pricing indicates that the market has a high expectation of the Fed cutting rates by 25 basis points three times before the end of this year, which will keep the Fed roughly in line with its peers, although the Fed's actions are slightly delayed.

It is expected that the European Central Bank will cut rates at least three times this year, by 25 basis points each time; the Bank of England will also cut rates three times. According to data from LSEG, all three major central banks are expected to continue monetary easing at least until early 2025, even as the stickiness of service sector inflation continues to trouble policymakers.

For the global economy, this means that next year will see a widespread low interest rate environment and significantly reduced inflationary pressures. In the United States, recent fears of a recession have greatly eased, although major manufacturing economies like Germany are showing weakness, while service-oriented countries like the UK are demonstrating steady growth.

The impact of these changes on the market is still uncertain. In 2023, European stocks (measured by the regional Stoxx 600 index) rebounded from the lows of 2022 and have risen by nearly 10% year-to-date, reaching an intraday historical high on Friday. On Wall Street, the S&P 500 index has risen by 17% year-to-date.

The VIX volatility index, which surged in early August during a global stock market downturn, has now returned to below average levels, as Porta Advisors Chairman and Partner Beat Wittmann stated in an interview with CNBC's "Squawk Box Europe" on Thursday.

"In terms of price momentum, valuations, and sentiment, the market has basically recovered, and we are entering the seasonally weak months of September and October. I expect the market to fluctuate due to various factors, such as geopolitical issues, corporate earnings, especially from companies in the artificial intelligence sector," Wittmann said.

Wittmann also added that market volatility will be influenced by "overdue consolidation adjustments" and certain industry rotations; but "for the remainder of this year, especially towards 2025 and beyond, the preferred asset class is very clear, which is stocks."

Although recent Fed remarks seem favorable to the stock market, Manpreet Gill, Chief Investment Officer for Africa, the Middle East, and Europe at Standard Chartered, stated in an interview with CNBC's "Capital Connection" on Monday that data from the U.S. labor market (the next key report will be released on September 6) still needs to be closely monitored "We still believe that achieving an economic soft landing is feasible... It has almost become a bit binary, as long as we avoid downside risks, stock profit growth remains very favorable. Our recent pullback has a bit of a 'clearance' feel," Gill said.

"I think a rate cut, or at least the expectation of a rate cut, is indeed the last puzzle piece that the market is expecting. So overall, we think this is a positive outcome," Gill said, referring to the volatility risks that may be triggered by future U.S. economic data in the coming months.

Arnaud Girod, head of economics and cross-asset strategy at Kepler Cheuvreux, said in an interview with CNBC on Tuesday that bonds have performed strongly in the summer, and stocks have also recovered; but investors now have to "judge the direction of the U.S. economy and the speed of rate cuts based on faith."

"I really think the more rate cuts, the greater the possibility of negative data accompanying these rate cuts, leading to a weakening of profit momentum. So I find it hard to be too optimistic," he said.

Meanwhile, "the stock market is showing some degree of 'indifference to interest rates'," Girod added, as tech giants have surged during periods of high interest rates - a traditional view that this should harm growth and tech stocks. According to Girod, this will make Nvidia's performance a key observation point