But there's a cost. Liquidity-driven rallies rarely stay contained. If the Fed cuts while fiscal stimulus is still surging, inflation could reaccelerate—especially with tariffs set to push prices higher by late summer. That’s the risk Powell faces: cut too soon and risk a second inflation wave; wait too long and risk tightening into slowdown. For now, markets are betting on the sweet spot—just enough weakness to justify easing, not enough to derail earnings or crush momentum.
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In short, rate cuts are no longer about recession insurance. They’re becoming the trigger for the next leg of speculative excess. And as retail leads the charge, the line between reflation and overheating grows thinner by the day.

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