October 29, 2025: The Best Cuts
In times like these, we keep thinking of the saying, "don't let brains get in the way of a bull market." There should be an investment textbook that simply says if the economy is not going into a recession, and the Fed is cutting rates, it is bullish (period).
Here is what we know:
The Fed cutting rates in non-recessionary periods is not typical.
Over the last 45 years, there have been 9 prior periods where the Fed has cut interest rates - 6 of them being recessionary periods (chart below).
The only times they were cutting in non-recessionary periods were in the mid-1980s and the mid-to-late 1990s.
Both periods were exceptional for the stock market.
In our view, the Fed will communicate that this October’s rate cut will be an insurance cut as the economy still seems to be holding up ok, and while riskier assets are already priced nearly for perfection.
Insurance cuts are about as good as it gets for stocks historically.
The financial markets are being influenced by a mix of factors this week, including the following:
We will keep an eye on how markets react to the Fed's rate decision and the forward guidance, as well as the reports from the big tech companies, as their performance often sets the tone for the broader stock market. In addition, we are focused on the highly anticipated meeting between US President Donald Trump and Chinese leader Xi Jinping, which could ease trade tensions and inject optimism into global markets.
Monday - Durable Goods Orders
Tuesday - Consumer Confidence
Wednesday - Home Sales (September), FOMC Interest Rate Decision & Statement
Thursday - Unemployment Claims (Weekly)
Friday - Personal Income and Spending (September)
Sources: gemini.google.com, https://www.jhinvestments.com/resources/all-resources/other/market-intelligence-weekly
