Fed Set to Cut Rates for a Third Time; S&P 500 Bounces Back

Summary

The Federal Reserve has cut interest rates for the third consecutive time this year, reducing the federal funds rate by 25 basis points to a range of 3.50%-3.75%. This move is aimed at increasing market liquidity and has led to a rebound in U.S. stocks, with the S&P 500 nearing historical highs.QQ News+ 3

Impact Analysis

So the Fed’s third rate cut this year is a clear signal they’re worried about economic pressures, especially with a weak labor market and rising unemployment among college grads. The timing is strategic, right before the holiday season, to boost market sentiment and liquidity. The market’s already pricing in a 90% chance of this move, so it’s not a surprise, but the scale of the response—cutting rates and buying $400 billion in short-term bonds monthly—is significant. This is classic ‘not QE’ QE, and it’s working; stocks are rallying, with the S&P 500 close to record highs. But watch out for inflation concerns—they’re still in play. For the portfolio, this is a green light for equities, especially those sensitive to interest rates. But keep an eye on inflation data; if it spikes, the Fed might have to pivot, which could shake things up. Consider increasing exposure to sectors that benefit from lower rates and liquidity, like tech and consumer discretionary.