After a big drop, Morgan Stanley calls for the Federal Reserve to step in!

US stocks rose on Tuesday, but investors remain uneasy about Monday's historic global sell-off, which was triggered by weak US economic data and an unexpected rate hike in Japan. David Kelly, Chief Global Strategist at JPMorgan Chase Asset Management, stated that in the US, the "bloody" market plunge should be a signal for the Federal Reserve to take more measures to help investors regain confidence in the economy during this period of extreme volatility. In an interview, Kelly suggested that the Federal Reserve should send a strong signal to the market that the situation is still under control. Kelly said: "I think they should say, 'We expect the economy to slow down, which is what we are seeing now. We are indeed prepared to cut interest rates at the appropriate time, but we do not see an emergency at the moment.'" On Wednesday, Bank of Japan Deputy Governor Masayoshi Amamiya spoke for the first time after "Black Monday," stating that the Bank of Japan will not raise interest rates if the market is unstable, soothing anxious investors and leading to a rebound in Asian stock markets, with the Nikkei 225 index rising by 3% at one point. Some commentators have called for an emergency rate cut by the Federal Reserve after the massive sell-off. However, Kelly believes that such a move would not be constructive. More importantly, an abrupt rate cut could exacerbate investors' concerns about the economy. On Monday, US stock indices plummeted, with the Dow Jones Industrial Average falling over 1000 points and the Nasdaq Composite Index dropping over 3%. Globally, the Japanese Nikkei 225 index plunged by 12.4%, marking the largest single-day decline since the 1987 Black Monday crash, with European markets also declining. The sell-off prompted some investors to bring out recession scenarios, invest in defensive stocks, dividend stocks, and government bonds, while selling high-growth stocks related to popular trades such as artificial intelligence. Kelly pointed out that one major issue is that the Federal Reserve should not have kept interest rates at such high levels for so long. "I think the Fed should always strive to return to a neutral level and stay there. They should not try to overtighten policy, nor should they try to ease policy to stimulate the economy." In summary, due to the delayed rate cuts, the Federal Reserve has led to a weak job market, which has to some extent contributed to the market's recent sharp declines. But even if rate cuts were to occur at the last policy meeting, it would not be a quick fix, unable to prevent further volatility, and like rate hikes, rate cuts also have a lagging impact on the economy. "People just don't understand this. I don't think the Fed has told people this, or maybe they themselves are not aware of it," Kelly said, adding, "It's a drag before it becomes a stimulus." Kelly believes that the US economy is likely to continue to slow down, with a recession and a larger stock market correction both possible. "A 10% correction or a 20% bear market decline is entirely possible," he said. "If you are an investor, the question is, you don't know when it will start to plummet ”