The Fed's big move disrupts the global market, prosperity or recession? Investors are anxious!

According to the Zhitong Finance and Economics APP, global large investors remain vigilant about the market's sharp fluctuations. The previous aggressive rate cuts by the Federal Reserve have raised concerns about whether the U.S. economy will prosper or fall into recession, leading to chaos in global stock, bond, and currency markets.

The Federal Reserve announced a 50 basis point rate cut on Wednesday, exceeding the expectations of most economists and market participants who anticipated a 25 basis point cut. Following the Fed's rate decision, the euro, pound sterling, Norwegian krone, Australian dollar, and other currencies strengthened against the U.S. dollar, and U.S. stocks rose significantly (although they closed slightly lower on Wednesday).

However, the Bank of England announced on Thursday that it would keep interest rates unchanged due to uncertainties in inflation outlook and global demand. This is a sign that policymakers outside the U.S. are uneasy about the Fed's rate cuts.

Traders have lowered their expectations for a rate cut by the Bank of England. Some fund managers have warned that the Fed's significant rate cut may provide excessive support to the already strong U.S. economy, boosting global economic growth but also potentially raising commodity and consumer prices.

Trevor Greetham, Multi-Asset Head at Royal London Asset Management, said, "I think it is more likely that the Fed's rate cut is too large, leading to accelerated economic growth. There may not be a significant amount of rate cuts globally at that time." He also expects increased market volatility thereafter.

Tim Drayson, Chief Economist at Legal & General Investment Management, said, "I think there will be more turbulence in the market, with too many risks." He was referring to the prospect of slowing U.S. economic growth.

Traders have almost unanimously reduced their expectations for a 25 basis point rate cut by the Bank of England in November to around 80%, and believe that the European Central Bank is unlikely to cut rates next month. However, investors believe that this prediction is not stable. Rate setters in Europe are struggling to address the challenge of slower economic growth compared to the U.S. but more complex inflation, with their policy paths and markets dependent on various unpredictable situations in the U.S.

Shamil Gohil, Portfolio Manager at Fidelity International, said that weak economic growth in the U.S. and UK could prompt the Bank of England to accelerate its rate cuts and boost UK government bonds. However, he also added that if the current expectations of further rate cuts by the Fed are proven wrong, these bets could easily be affected, "which could lead to selling across all markets." He also stated that overall, he expects global market volatility to rise.

The euro area's core inflation rate is slightly below 3%, and there are disagreements among European Central Bank policymakers on the future rate path after rate cuts in June and September. Trevor Greetham said that if the Fed continues to cut rates, further strengthening of the euro against the dollar will weaken Europe's export competitiveness, putting greater pressure on the European Central Bank.

Schroders fixed income strategist Marcus Jennings said that the dovish Fed combined with a weak Eurozone economy makes German government bonds more attractive. Marlborough's Chief Investment Officer Sheldon MacDonald stated that market volatility may increase, as stock market valuations imply that the U.S. economy will be boosted by rate cuts, while bond pricing suggests an economic recession.

Investors also warned that if U.S. economic data changes the market's view on the Fed's next move, the outlook for global central banks may change. Ben Gutteridge, multi-asset manager at Jupiter, said that if the Fed prevents an economic downturn, it will boost trades surrounding central bank policy divergences, such as betting that the Bank of England tightening policy will strengthen the pound against the dollar. However, he also mentioned that a softening U.S. economy will weigh on global stock markets and support the bond market, narrowing regional market divergences