BofA Warns Fed Dovish Cut Next Week Could Derail Year-End Stock Rally

Bank of America strategists warned that an overly dovish Federal Reserve outlook at next week's meeting could threaten the year-end stock rally, with the S&P 500 currently within 0.5% of its October peak. Strategist Michael Hartnett said a dovish rate cut might test current optimism by signaling an economic slowdown exceeding expectations. "The only thing that can stop a Santa Claus rally is a Fed dovish cut triggering a selloff in long-duration U.S. Treasuries," Hartnett wrote. The team also noted that delayed key employment and inflation data releases in late December, due to government shutdown impacts, will pose additional market risks.