Recession amidst the faces of investors?

We are seeing major liquidations across all asset classes in the past few days. The main question is how the FED will react to this volatility.

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The FED will consider two options: an emergency sharp cut or a steady cut.

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An emergency sharp cut can deliver instant liquidity to stocks, crypto, and bonds, speeding up a rebound by decreasing borrowing cost and enticing investment.

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However, it can aggravate market volatility, potential inflation spikes, and reduce the FED's future policy flexibility.

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A steady cut although slower, could be more sustainable, but the immediate impact may be necessary in urgent scenarios, and the meeting for this is scheduled for September.

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Additional, the FED might consider a bailout option, injecting funds directly to stabilize key sectors. This could quickly restore confidence and prevent systemic collapse but raises concerns over moral hazard and long-term debt sustainability.

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It will be interesting to see which option the FED decides to take here.