Wall Street's famous bull: US stocks will see a few weeks of rebound after the Fed's September rate decision

According to Tom Lee, head of research at Fundstrat, a prominent Wall Street bull, the stock market could see a rebound that lasts for weeks after the Federal Reserve's big rate decision on Wednesday.

Lee noted that the central bank's policy meeting, at which officials will discuss the next interest rate adjustment, will take place on Tuesday and Wednesday. The market widely expects the Fed to cut rates by 25 or 50 basis points, its first cut in four years.

"There are some positive things going on. We know the Fed is going to cut. Given the inflation data supporting a cut, and the labor market needing some support, I think that gives the market confidence. I think we're going to have a good market performance both during the meeting and in the next couple of weeks," he said.

Wall Street has been expecting a rate cut for months, especially as the financial environment has tightened and the economy has shown some signs of weakness. Even though growth remains strong, the labor market has steadily slowed. According to the Bureau of Labor Statistics, new hires in July were 3.7% lower than a year ago.

According to the CME FedWatch tool, the market expects a 61% chance of a 50-basis-point cut on Wednesday. But Lee said that stocks should rise regardless of whether the Fed cuts by 25 or 50 basis points, as long as officials assure the market that there will be more cuts.

"Either a 25-basis-point or 50-basis-point cut could have either hawkish or dovish implications," he said. He explained that a large cut could spark fears of a recession. "I think the key is whether Chairman Powell can convey that this is the beginning of a cycle, and that they have confidence that we're returning to neutral. Regardless of what they do, it's actually dovish."

Despite this, the prospect of a recession remains uncertain. New York Fed economists expect a 62% chance of a recession by August next year, up slightly from last month.

He added: "If the FOMC members' discussion drags on, the market may worry about the risk of a hard landing. However, I think the final result will be positive."