Market Update: Fed's Latest Moves and What They Mean for Your Portfolio

As anticipated following its most recent policy meeting, the Federal Reserve announced a 25 basis point reduction in its benchmark interest rate today. This marks the second consecutive monthly cut, bringing the federal funds rate target range to 3.75%–4.00%. In a complementary move, the Fed also signaled it will halt the reduction of its balance sheet holdings starting December 1, effectively stabilizing its size after months of gradual shrinkage. As we noted in prior updates, Chair Jerome Powell had previewed this step earlier this month—it's a subtle way to provide additional economic support without further easing rates.

Looking ahead, however, the path forward remains uncertain. The decision passed the Federal Open Market Committee (FOMC) with a 10-2 vote, but the dissents highlight deepening divisions. Stephen Miran, a voting member appointed by President Trump, advocated for a more aggressive 50 basis point cut—aligning with the administration's public calls for bolder action. Conversely, St. Louis Fed President Jeffrey Schmid opposed any cut, likely viewing persistent inflation (recent data shows annualized price growth exceeding 3%) as a greater threat than softening labor conditions.

This divide was evident in Powell's post-meeting press conference, where he tempered expectations for an automatic December rate cut. "In the committee's discussions, there were strongly differing views about how to proceed in December," he stated. "A further reduction... is not a foregone conclusion. Far from it." His remarks contributed to a late-session pullback in equities: the rate-sensitive Russell 2000 fell about 1%, the S&P 500 closed flat, and the Nasdaq Composite eked out a 0.6% gain.

Powell emphasized "two-sided risks" to the Fed's dual mandate of price stability and maximum employment. He described the labor market as "gradually cooling"—partly due to moderating immigration—and noted lingering inflation pressures from potential tariffs. That said, he's growing more optimistic on the inflation front. On the December question, he elaborated: "We've now moved 150 basis points [since initiating cuts last year], and you are in the range between 3% and 4%, where many estimates of the neutral rate live... For some part of the committee, it's time to maybe take a step back."

Markets, which had priced in a December cut with over 90% probability yesterday, adjusted downward to around 65% today based on fed funds futures. Powell stressed this would likely be a pause at most, not a full halt to easing. Keep in mind, his term ends in May 2026, and the incoming administration is expected to nominate a successor more inclined toward accommodative policy—potentially accelerating cuts in 2026.

Earnings Spotlight: Magnificent Seven Deliver, With Nuance

Today also brought key quarterly results from three "Magnificent Seven" stalwarts—Microsoft (MSFT), Alphabet (GOOGL), and Meta Platforms (META)—all reported after the bell. Each exceeded Wall Street consensus, underscoring resilient demand in tech. Highlights include:

• Microsoft: Cloud revenue surged 40% year-over-year, though shares dipped in after-hours on concerns over elevated capital expenditure plans.

• Alphabet: Cloud growth hit 34%, boosting shares modestly after hours.

• Meta: Solid results overshadowed by a one-time $16 billion tax charge tied to recent tax legislation (dubbed the "Big, Beautiful Bill" in some circles), pressuring shares lower.

We'll circle back with deeper analysis in our next update, including implications for broader market rotations.

In summary, today's Fed actions reinforce a "higher for longer" nuance amid balanced risks—warranting vigilance on inflation data and labor prints ahead of December. Tech earnings affirm sector strength, but valuation discipline remains key. As always, we're here to tailor these insights to your goals. Please reach out with questions or to review your allocations.

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Disclosure: This content is for informational and educational purposes only and should not be interpreted as financial, legal, or tax advice. While we strive for accuracy, we do not guarantee the completeness or reliability of the information provided. Investment decisions should be based on individual circumstances, and we recommend consulting a qualified professional before implementing any financial, legal, or tax strategies. Past performance is not indicative of future results, and all investments carry risks, including potential loss of principal. No investment strategy can guarantee success or protect against loss in all market conditions. Investors should carefully consider their risk tolerance, investment objectives, and financial circumstances before making investment decisions.