What does it mean for your investments?
Wall Street still has more to unpack from Wednesday’s Federal Reserve meeting, one that showed a deeply divided U.S. central bank that could add to market uncertainty. Stocks were mixed following Fed Chair Jerome Powell’s post-meeting presser, with the Dow Jones Industrial Average jumping 260 points, while the S & P 500 and Nasdaq Composite fell. The bond market vacillated, with the 10-year U.S. Treasury yield dipping below 4% before rising once more. The U.S. dollar dropped following the Fed decision. Those wavering signals reflect the divisions within the Fed. The central bank reduced interest rates by a quarter percentage point — in what Powell called a ” risk management ” cut — and signaled two more cuts coming this year, to address a weakening labor market and higher inflation. Within the ” dot plot ” itself, there is even more confusion. The Fed expects just one interest rate cut in 2026, but that forecast covers over a wide range of opinions within the central bank. Two voting members, for example, expect as many as four cuts next year, while three are projecting three reductions. .SPX 1D mountain SPX intraday “There was a significant dispersion in policy views by this Fed for 2026, which probably means more volatility in financial markets next year,” wrote Jack McIntyre, portfolio manager at Brandywine Global. “Now, we are all back to data dependency.” What’s clear is that the Fed is in the unenviable position of having to address a weakening economy, even as it acknowledges the risk to inflation is higher — meaning just about every data point will continue to be monitored closely in the months ahead. Indeed, the Fed’s updated economic projections show slightly faster economic growth expected in 2026 than it projected in June, while the outlook for inflation is now modestly higher for next year. “In addition to the political jabs aimed at them, the Fed is in a tough spot,” Brandywine Global’s McIntyre wrote. “They expect stagflation, or higher inflation and a weaker labor market. That is not a great environment for financial assets.” For investors, the good news it that the Fed will be more dovish going forward. Powell in his post-meeting comments noted the weakness in the recent payrolls data. The Fed is expecting two more rate cuts this year, one more than the central bank indicated back in June. What’s more, the makeup of the Fed could tilt more dovish, after Trump’s pick Stephen Miran on Wednesday voted in favor of a larger half point cut. Yet, there are concerns ahead as well. Any rising concern over the future of Fed independence could add to long-term concern for U.S. assets, with the U.S. dollar in particular sliding following the decision. Any additional evidence of a stagflation scenario could also hurt risk assets. Here’s what some strategists and investors on Wall Street had to say following the Fed announcement: Rick Rieder, chief investment officer of global fixed income at BlackRock: “We thought that Chair Powell’s characterization of an uncertain, and potentially deteriorating, forward labor market, while still recognizing some near-term inflation pressure, was clearly justified and re-initiating the rate cutting process made a good deal of sense. We think that moving the Funds rate further down will also be part of this plan, and we anticipate another two 25 bps cuts this year and probably a continuation of at least a moderate rate cutting cycle next year as well.” Ronald Temple, chief market strategist at Lazard: “This is clearly a divided FOMC. If we ignore the outliers in the “dot plot”, nine participants expect two additional rate cuts by year-end while six see none. Despite the Federal Reserve cutting interest rates and telegraphing more to come, FOMC participants raised their projections for GDP growth between 2025 and 2027. Additionally, their median expectations for the unemployment rate in 2026 slightly decreased, while their forecast for core inflation edged up modestly. Investors should beware of taking the “dot plot” to the bank, as this is clearly an FOMC where the policy path is still unclear and where rising inflation could lead to a very different outlook in the months ahead.” David Russell, global head of market strategy at TradeStation: “There might be disagreement, but there isn’t much doubt policymakers will keep cutting. Trump’s influence was felt as Miran went to work with a dovish dissent. That process will only increase next year when Powell leaves as chair. Inflation may still be a risk, but it’s still too early to worry much. Price stability is fading as a mandate as full employment takes center stage. This is positive for risk assets now, and a big negative for the U.S. dollar.” Christian Hoffmann, head of fixed income at Thornburg Investment Management: “New board member, Stephen Miran, was just sworn in and dissented. Given his very public views and posturing, any other action would have been surprising. Dissents from Bowman and Waller were a toss-up in our view, and somewhat surprising that we didn’t get at least one additional dissent. I might chalk that up to legacy members pushing back against outside influence or a revised outlook from retail sales data. Additionally, I think markets have been too sanguine about the increasingly politicized and potentially less independent Fed. If dissents become the norm, we are moving away from the long precedent of a consensus-driven Fed to something maybe entirely different.” Jamie Cox, managing partner at Harris Financial Group: “The Federal Reserve is late no more. It seems the Fed has not just pivoted, but made a complete U-turn. Markets seem to like what they see, but the dollar is another story entirely.” ( Learn the best 2026 strategies from inside the NYSE with Josh Brown and others at CNBC PRO Live. Tickets and info here . )
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