Will the cooling of the AI boom force the Fed to cut interest rates? This time it might really be different.

Question

Recently, the market&#39;s frenzy for AI has begun to cool down. Some analysts have put forward an interesting viewpoint: if this concern continues to ferment, turning small fluctuations into a major collapse, the Fed may be forced to cut interest rates earlier to stabilize the situation.Of course, this is not the most likely scenario at the moment. As per usual practice, the Fed generally does not easily intervene in the market—unless there is a real liquidity crisis and trading comes to a standstill. Although market sentiment has indeed worsened recently, we are still far from a true crisis, especially since there was a rebound last Friday.But this time it might really be different. Why? Because the current real economy&#39;s dependence on Wall Street is unprecedented. Many economists, and even some policymakers, admit that the thickness of the wallets of ordinary people and businesses largely depends on stock market performance. Once asset prices plummet, the wealth effect disappears, and consumption and investment will be immediately affected.This means that the Fed might not have to wait until there is a real problem in the financial system before considering taking action—because the fluctuation in asset prices is now directly related to the overall health of the economy.

WalletWhisperer · Accepted Answer

nah the wealth effect thesis is getting too much airtime... been tracking wallet clustering patterns and the accumulation phase never actually stopped, just went quiet. fed's hand isn't forced by sentiment spikes, it's forced by transaction velocity collapse—and we're nowhere near that threshold yet. market just needed a breather from the ai hype cycle.

FUD_Whisperer · Answer

To put it bluntly, when the stock market crashes, the Fed has to intervene; I have seen through this logic a long time ago.

CoffeeNFTs · Answer

Here we go again with the interest rate cut hype? Last Friday it even rebounded, I&#39;ve heard this line too many times.

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When the stock market falls, they have to rescue it, this logic is truly absurd, when has the Fed ever been this obedient?

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The wealth effect narrative, to put it bluntly, is just a fear that the common people won&#39;t have money to spend, right?

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Nah, the Fed won&#39;t break down this quickly, unless there&#39;s a real liquidity crisis.

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Laughing to death, now even analysts are making up stories, betting on interest rate cuts to make money?

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The real economy has indeed been hijacked by Wall Street, this statement is not wrong.

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Wait a minute, are we really going to have the Central Bank rescue the market when the AI craze cools down? This is the real "artificial".

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Rather than guessing about interest rate cuts, it&#39;s better to buy the dip yourself, don&#39;t let public opinion lead you by the nose.

Layer2Arbitrageur · Answer

lmao the wealth effect copium is wild. if you actually ran the numbers on asset correlation vs real consumption patterns, there's like 200bps of slippage in that thesis. not saying fed won't cut, but calling it "unprecedented" when we literally just watched 2020... ngmi energy fr

DegenRecoveryGroup · Answer

Still talking about the Fed saving the market, how long will this script be performed?

Wall Street has kidnapped the entire economy, it&#39;s laughable.

The AI bubble has burst, but it&#39;s not that severe, don&#39;t be alarmist.

Is the stock market&#39;s big dump a reason to cut interest rates? What were those high interest rates for all those years?

The wealth effect is indeed brutal; ordinary people really rely on stock trading to survive.

As for cutting interest rates, anyway, us retail investors are just lying flat.

HodlVeteran · Answer

Here comes another round of "the boy who cried wolf" script... I'm a survivor of that brutal crash in 2018. Back then, people also said the Fed would save the market, but what happened? It only ended after everything was slashed in half.

But this time does feel a bit different. Wall Street has hijacked the entire economy—basically, when the stock market rises, everyone feasts; when it falls, everyone goes hungry. The cooling of the AI frenzy might really be the trigger this time...

My advice to everyone: be mentally prepared to hold cash through the holidays. Don't count on any immediate rate cuts to save the market.

quietly_staking · Answer

In simple terms, it means the Fed has been hijacked; when the stock market crashes, people have no money to spend, and the economy collapses, so cutting interest rates is no longer a choice.

TokenToaster · Answer

In simple terms, it means the Fed has been hijacked; once the stock market crashes, they have to obediently engage in point shaving.

Degen4Breakfast · Answer

The AI bubble has burst, and the Fed has to step in to save the market. In plain terms, we are all being held hostage by Wall Street.

MainnetDelayedAgain · Answer

How long has it been since the last promise of "not saving the market"? The database shows: it&#39;s always different, and every time they save it. Let&#39;s just wait for the flowers to bloom from the pie drawn by the Fed.