The Fed lowered rates by 25 bps to 4.0–4.25% and signaled two more cuts could follow this year. Powell acknowledged the job market is no longer “very solid,” with payroll growth averaging just 71k over the past year and several months revised into net losses. Tariff-driven inflation is still a concern, but risks are shifting toward rising unemployment.
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The dot plot (below) shows just how divided policymakers are: some see the Fed stopping after this cut, while others project multiple reductions through 2026. Longer term, most expect rates to settle near 3%, well above the near-zero levels of the 2010s.
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Market Impact

• Utilities (XLU): Benefit from cheaper borrowing costs and stable dividends.
• Gold & Silver (GLD, SLV, WPM, KGC): Hit new records as investors hedge against a weaker dollar.
• Healthcare (UNH, HUM, CNC): Gains as defensive havens during rate cuts.

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Rate Cuts Don’t Always Spark Bull Markets

History shows markets often stumble right after cuts. In the first 1–2 years, returns are usually weaker because cuts signal slowing growth. Over 3–4 years, markets recover, but the short run is volatile. For now, small caps, biotech, and REITs are rallying — classic “cut plays” — but caution is warranted.

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Market Impact

• Small Caps (IWM): Pop early when rates drop.
• Biotech (XBI): Benefit from cheaper financing.
• REITs (VNQ): Gain from lower debt costs, but still tied to growth trends.

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