The Fed’s Cut Lifts Markets, but Uncertainty Persists

September 22, 2025

Financial Markets

U.S. equity markets rallied last week after the Federal Reserve cut the federal funds rate by 25 basis points. The move, widely expected by investors, was enough to push major indexes to record highs and sustain momentum through the week. The S&P 500, Dow Jones Industrial Average, and Nasdaq all closed at or near all-time highs, leaving analysts asking what comes next.

Investor optimism was bolstered by the Fed’s reassurance that the decision was intended as an “adjustment” rather than the start of an aggressive easing cycle. Still, questions remain about whether a single quarter-point cut is sufficient to offset slowing job growth, rising consumer strain, and uncertainty around trade policy. Gold prices surged to fresh records, indicating that some investors remain cautious despite buoyant equity markets.

Economics

The Fed’s vote was nearly unanimous, with only the newest governor, Stephen Miran, dissenting—not in opposition to a cut, but in favor of a deeper half-point move. His stance reflects the administration’s consistent preference for a more accommodative monetary policy. Chair Powell emphasized that future decisions will remain data-dependent, with inflation trends and labor market conditions serving as the primary guideposts.

Broader economic headwinds remain unresolved. Tariff policy lacks coherence, with shifting announcements complicating global trade planning. The President claimed progress with China on trade negotiations, though Chinese officials did not share the same characterization. Meanwhile, job creation has slowed, and the inflationary effects of existing tariffs are only beginning to filter through in the form of higher consumer prices and cost pressures on businesses.

Despite these challenges, structural strengths provide reasons for confidence. The U.S. dollar remains the world’s dominant reserve currency, underpinned by deep financial markets, a strong legal framework, and abundant natural resources. While not immune to shocks, the U.S. economy remains better positioned than most of its peers, and corporate profits continue to grow.

Conclusion

Last week’s developments illustrate the tension between short-term market optimism and long-term structural concerns. The Fed’s rate cut delivered a near-term boost, but unresolved trade disputes, slowing labor momentum, and geopolitical uncertainty temper the outlook.

For investors, the current environment underscores the importance of diversification, discipline, and a focus on quality—principles we believe are essential in keeping clients as safe as possible for the long term. Maintaining a measured approach remains the best strategy for navigating uncertain times.

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