Fed's 50BP Shock & Awe Cut: Recipe for Market Apocalypse?

The Federal Reserve is widely expected to cut rates by 50 basis points next week. But some worry such an aggressive "shock and awe" easing move could backfire spectacularly.

The concern? A half-point cut would be tantamount to waving the white flag on economic growth - catalyzing a market meltdown as recession fears go into overdrive.

"A 50 basis point cut would reek of panic from the Fed and signal they've fallen completely behind the curve," said BMO's Jennifer Lee. "It would be like plastering a recession sign on the economy."

History shows both previous times the Fed launched cutting cycles with 50 basis point blasts in 2001 and 2007, brutal recessions and bear markets ensued shortly after.

While a modest 25 basis point "baby step" could soothe investors, some bulls now fear anything more forceful than that could open up panic selling pandora's box.

Peter Boockvar of Bleakley Advisory warns: "If the Fed pulls the trigger on 50 and signals a lot more easing is coming, you could see a complete market breakdown on recession fears."

It leaves the Fed walking a tightrope. Too little action could disappoint a market pricing in an 83% chance of easing. But going overboard risks upending the recovery and igniting a market inferno.

YOU NEED TO WATCH THIS NEXT

Former hedge fund manager: "Move your money before the Fed's next meeting"

In 2022, the Federal Reserve raised interest rates and triggered a stock market event that slashed the average investor's portfolio nearly in half.

Now, according to the man whom CNBC calls 'The Prophet', the Fed could soon trigger another dramatic stock event – one investors have seen just 13 times since 1920. He warns: "This event will likely dictate the next decade of every American's financial life, and it's critical for you to take steps now to prepare."