Template

SEPTEMBER 20, 2025

My Thoughts on
the Market

Weekly Edition

How did the markets do?

• Stocks responded positively to the rate cut and finished the week at new all-time highs.
• Bonds responded slightly negatively to the rate cut, however that was after having rallied in anticipation of it over the past several weeks.

What headlines moved the markets?

• In a widely expected move, the Federal Reserve Board voted to cut interest rates by 0.25% on Wednesday.
  • This cut is a scratch not a gash.
  • “There is a remarkable divergence of views at the Fed” - Jeffrey Gundlach, CEO/CIO of DoubleLine Capital.
  • Most Fed governors expect around 1-2 more 0.25% cuts this year.
  • However the newest Fed governor, Stephen Miran, who joined on Tuesday, 9/16, has called for five 0.25% rate cuts this year. While his view is currently an outlier, the Fed Chair role opens next June, and whoever President Trump nominates is expected to share his preference for lower rates.
  • The Fed cutting interest rates doesn’t necessarily mean that mortgage rates will come down. Those are heavily influenced by market forces as well (supply and demand).
    • The pause in rates this year has created pent up demand for new home buyers waiting for rates to fall before getting a mortgage.
    • A shortage of new homes is keeping home prices stable. Limited new homes and strong demand to buy means that home prices will likely rise as interest rates fall.

Personal Finance: Start thinking about year-end tax planning now.
Disclaimer: taxes are complicated and unique to each individual. Consult with your advisor before making any major tax decisions. This is general educational information and not intended as financial advice.

• Brush up on the recent changes to income tax laws passed this year.
  • Note the increased standard deduction for tax payers over age 65 or the increased SALT deduction that apply this year.
• Review your realized and unrealized capital gains to look for tax loss harvesting and portfolio rebalancing opportunities.
• Tally up your income received so far this year and projected income for the remaining months. Apply the standard deduction and that should give you a ballpark estimate of where you are in the tax brackets for this year.
• Consider taking advantage of tax strategies based on your tax bracket today and where you expect to be in future years.
  • Near the top of the bracket and likely to pass into a higher bracket in the next few years because of RMDs? Roth conversions while in the lower bracket years might make sense.

Quote of the week:
“There is no risk-free path now.” – Jerome Powell.

• The Fed has two equally important, often opposing priorities - managing unemployment and inflation.
  • They just shifted their primary concern from inflation to unemployment.
  • If the economy was a car, then raising rates is like hitting the brakes. Lowering them is like hitting the accelerator.
    

Conclusion:

• Assuming that the Fed is going to continue with easing the monetary policy (lowering rates), then this should be good for the stock market in the near term.
  • Smaller companies who are dependent on loans to grow will benefit the most from cheaper borrowing costs.
  • Consumers are likely to spend more if they have less going towards monthly interest payments.
• Keeping with the same assumption (a declining interest rate environment), one would expect bonds to appreciate as older, higher paying bonds become more attractive than new, lower paying ones.
  • However the bond market this week seemed, for lack of a better word… confused. Concerns about inflation and devaluation of the dollar internationally caused prices for US treasury bonds to fall.
• Lowering interest rates will be good for the economy in the short term, but we could see inflation flare back up again down the road and a reversal in policy. Enjoy the good times while they last!

Have a nice weekend,

Kevin