U.S. economic data keeps coming back stronger than expected, and frankly it’s raining on the parade for markets.
For the majority of 2025, investors have been hankering after multiple base interest rate cuts from Jerome Powell and the Federal Open Market Committee (FOMC), knowing it would kick-start cheaper borrowing and foster economic activity. The general consensus was that once the Fed was confident enough to start cutting, it would spell a change in the weather: a move toward the greatly anticipated “normalization” of the funds rate.
So when the FOMC cut in September, this apparent fact was not only baked in by markets, but so too were the cuts expected to come for the rest of the year.
Unfortunately, the economy is faring far better than many estimated—meaning the Fed may not be forced into further action as quickly as anticipated.
Markets continued to struggle yesterday—the third day in a row—with Deutsche Bank’s Jim Reid noting: “The main catalyst was a strong batch of U.S. data, which meant investors dialed back their expectations for rapid Fed rate cuts, and pushed front-end Treasury yields higher. So that meant rate-sensitive sectors like tech took a hit, with the Magnificent Seven dragging down the broader equity market.”
