The Fed Is Expected to Cut 0.25% This Week — Bull or Bear?

The long-awaited rate cut is finally near. There’s now over a 90% probability that the Fed will cut rates by 25 basis points at this week’s September FOMC meeting.

Investors had been betting on a rate cut much earlier this year, but the Fed held off due to a strong labor market and inflation that refused to come down to the 2% target. However, with recent signs of weakness in the jobs data, the Fed is now expected not only to cut this week but also again in October and December — 0.25% each.

So, is this a bull or bear signal?

Historically, the Fed cuts rates in bear markets when the economy is weakening. But this time is different — the Fed is easing with the S&P 500 near all-time highs and the economy still growing at a projected pace of over 3% GDP.