“Probably the single biggest risk out there is the fact that there’s been a massive inflation in asset prices over the last decade, and lowering rates again just puts fuel on that fire,” Hornby said in an interview. “We are probably seeing the seeds of the next bubble being sown in front of our eyes.”

Her concerns resonate with many of her peers. The latest Bank of America fund manager survey, released July 16, showed 73% of respondents considered the business cycle a risk to financial market stability -- the highest percentage in eight years -- and almost half of them expressed concerns about corporate leverage.

With this in mind, Hornby favors securitized markets, such as agency mortgages, and she believes government bonds are well supported.

“This is not a Fed that wants to see rates back 100 basis points higher, because they thought that that was too restrictive,” she said. “And yes, there was some evidence that the more interest-rate sensitive sectors of the economy were slowing in the second half of last year, so that’s a fair point.”

That said, she’s not taking big positions in the Treasuries market, on the basis that there’s not much money to be made unless you are convinced a recession is around the corner and the Fed is embarking on a full easing cycle.

Investors seeking clarity on the path of interest rates will parse the Fed’s take on the economy and progress of U.S.-China trade negotiations. But it will help them to be more attuned to the Fed’s broader policy perspective, according to Jim Caron at Morgan Stanley Investment Management.

“What’s confusing to the markets right now is that the Fed is changing its policy response function” to factor in more global financial conditions, he said. He cited a recent New York Fed staff research paper as a hint that policy makers are increasingly focused on external factors.

As for the current implications, Caron says a moderate Fed easing can keep the economy expanding, and he’s looking for a half-point cut this month. He sees the next couple of months as “another bite of the apple” for investors in riskier assets.

Policy makers hinted at the dilemma they face in minutes from the Fed’s June meeting: “While overall financial conditions remained supportive of growth, those conditions appeared to be premised importantly on expectations that the Federal Reserve would ease policy in the near term.”

That could be read as, appease the market in July or it could force us to later.