Wall Street eyeing one big trade after Fed rate cut: Commodities

Commodities could soar after the Federal Reserve's quarter-point interest rate cut this week, though this will depend on whether the U.S. manages to avoid a recession, according to JPMorgan. "Historically, commodities have generated positive returns both leading up to and following the first Fed cut," JPMorgan analysts led by Natasha Kaneva told clients in a Thursday note. "However, the nature of the cutting cycle is crucial." Commodities generate strong returns if the Fed cuts when economic growth is firm and inflation is on the decline, the analysts said. But they tumble if the cut comes when inflation is stubborn, growth is slowing, and a recession is imminent. Commodities rallied more than 15% nine months after the Fed cut rates in 1995 and 2024, periods with macroeconomic environments