Higher for (not much) longer

The “everything rally” has gone global, sending stocks and bonds soaring in Asia and Europe and lifting U.S. stock futures, after investors got their clearest signal yet that the Fed would begin cutting interest rates soon. Hopes are growing, too, on Thursday that other central banks will follow suit.

The Fed delivered an unexpectedly dovish forecast on Wednesday, penciling in three rate cuts next year. Those moves are projected to lower the Fed’s prime lending rate to 4.6 percent, a notable drop from the central bank’s last estimate in September.

The revision sent the Dow Jones industrial average to a record high. The S&P 500 also achieved that marker on a so-called total return basis — which would take dividends into account — according to Deutsche Bank analysts. Treasuries rallied as well, with the yield on a 10-year note dipping below 4 percent on Thursday, its lowest level since July. (Yields fall when prices rise.)

That’s good news for borrowers because many common long-term loans, including mortgages, tend to track the yield on the 10-year Treasury.

Elevated borrowing costs appear set to come down. Over a 16-month stretch that ended in July, the Fed jacked up rates to a 22-year high to fight inflation. That aggressive approach forced businesses and households to cut back on borrowing. It also chilled global M.&.A activity and roiled the commercial real estate market.

Goldman Sachs economists have now revised their 2024 forecast, predicting that the Fed’s first rate cut would come in March.