Stock exchanges, no shake-up in sight. Traders believe in Fed cuts

(Il Sole 24 Ore Radiocor) - No shake-up in sight for the financial markets: for the majority of Assiom Forex traders, equity indices will remain stable between now and next spring, although investors are gradually increasing their expectations of declines. This is what emerges from the September survey conducted by the association, in collaboration with Il Sole 24 Ore Radiocor.

Overall, for 75% of the respondents (up from 79% in August), stock markets will not fall from their current levels. 41%, in line with the August survey, expect "a stability of stock prices in the next six months", explains Massimo Mocio, president of Assiom Forex. However, "the share of those who expect an upturn is decreasing (from 39% to 34%)" and "the share of those who assume a downturn is growing (21% to 25%). This percentage was 18% in July and 15% in June. More specifically, 33% of traders (up from 37% the previous month) indicate gains of between +3% and +10%, while only 1% expect a strong bullish trend (over +10%), compared to 2% in the August survey. No one expects a strong market decline (more than -10%).

Assiom Forex traders expect the Federal Reserve to continue on its path of easing the cost of money, in line with money market expectations. After the first cut, made in September, according to the survey, the majority of respondents (61%) expect an overall cut of 50 basis points at the next two US central bank meetings, scheduled for October and December this year. By contrast, one-third of the traders (32%) estimate a smaller reduction, limited to 25 basis points. Only seven per cent instead point to a maxi cut of 75 basis points.

Financial market participants continue to bet on the strength of the euro against the dollar. 45% of respondents expect an appreciation of the single currency, up from 42% in the August survey. By contrast, 39% expect a period of stability (up from 44%) while 16% indicate a depreciation of the euro against the dollar (up from 14%). "After the yearly highs at 1.19 that followed the Fed's first rate cut for 2025, the euro-dollar exchange rate remained between 1.165 and 1.18 throughout the month," Mocio noted.

Bets on Italy's financial solidity and the good performance of the spread between Btp and Bund were consolidated in September. "The spread between Italian and German ten-year government bonds remains stable, close to the lowest of the year, supported by the positive revision of Italy's sovereign rating by Fitch (from BBB to BBB+)," Mocio comments. "According to our survey, the share of respondents who expect a Btp-Bund spread between 50 and 100 basis points in the next six months has further increased, from 73% to 78%''. A percentage that has been gradually increasing since the beginning of the year: in January it was 5% and then shot up in May (26%) after the ratings agencies' promotions on Italy's public debt (S&P in April and Moody's in May). For 22% (up from 21%) the spread will rise between 100 and 150 basis points. No one believes it will exceed this threshold, compared to 6% in August, which indicated a range between 150-200 points.