Full Article: S&P Global Market Intelligence – Markets Eye Boost From Expected Fed Rate Cuts Despite Potential Risks
“Everyone likes a rate cut — cheaper money fuels growth — but cutting rates when inflation is stable or rising, especially amid new tariff pressures, could worsen inflation. That said, some market participants would still cheer a cut because of the boost it would give to valuations.”
—Stephan Shipe, Founder of Scholar Financial Advising
Key Takeaways
- Markets are pricing in a 60% probability of rate cuts by year-end, even as inflation remains elevated above the Fed’s 2% target.
- Equities have rallied, with the S&P 500 up nearly 28% since April, when President Trump paused plans for a full slate of tariffs.
- As Stephan Shipe notes, rate cuts can stimulate growth in the short term, but they also risk exacerbating inflation—especially in the presence of tariff pressures.
- Investors should be cautious about chasing market momentum. While rate cuts can lift valuations, they may also introduce more volatility if inflation remains sticky.
- Individual portfolios should focus on diversification, risk management, and long-term goals, rather than trying to time Fed actions or market reactions.