Equities End Week Higher as Fed Approves 25 Basis Point Rate Cut

Equities End Week Higher as Fed Approves 25 Basis Point Rate Cut

Global markets posted solid gains last week after the U.S. Federal Reserve cut rates by 25 basis points, extending the S&P 500’s positive streak to six of the past seven weeks. Global equities, measured by the MSCI All Country World Index (ACWI), rose 1.01%, while U.S. equities, represented by the S&P 500, gained 1.25%. The Nasdaq and Russell 2000 led performance, returning 2.22% and 2.19%, respectively.

Fed Rate Cut

 

The Federal Reserve concluded its September policy meeting on Wednesday with its first 25 basis point (0.25%) rate cut of 2025, responding to signs of a slowing U.S. labor market. The move, widely anticipated and almost unanimously supported by FOMC members, signals a proactive effort to support the economy despite elevated inflation. Markets welcomed the decision, viewing it as a likely starting point for a broader series of rate cuts.

U.S. Retail Sales

U.S. retail sales rose 0.6% in August compared to the previous month, exceeding economists’ consensus forecasts and matching the pace set in July. The stronger-than-expected data comes despite signs of weakening in the labor market and persistent inflationary pressures weighing on consumers. The report highlights continued resilience in consumer spending, which has been a key driver of economic growth throughout the year. While August’s results suggest households remain willing to spend, particularly in categories tied to discretionary purchases, questions remain about the sustainability of this trend as borrowing costs stay elevated and savings rates decline.

U.S. Treasury Yields

Despite the Federal Reserve’s decision to cut rates by 25 basis points on Wednesday, U.S. government bond yields rose modestly for the week, with longer-duration maturities experiencing the steepest increases. The 10-year U.S. Treasury yield closed at 4.13% on Friday, up from 4.06% the prior week

Looking Ahead

For the week ahead, investors will focus on Friday’s release of the August Personal Consumption Expenditures (PCE) report to see if the recent trend of modestly rising inflation continued. In July, core PCE inflation rose 2.9% year-over-year—the highest level in five months—making this upcoming data an important indicator for future Fed policy expectations.

As Always

I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.