Hi everyone, I’m Gargi Pal Chaudhuri, here with another Macro Minute.
The Federal Reserve just cut interest rates by a quarter of a percent — the first move we’ve seen since December 2024. This was widely expected, and investors are now watching closely for additional cuts later this year.
Here are the key takeaways: Some key takeaways: the FOMC statement mentioned that "downside risks to employment has risen" and in the Summary of Economic projections, growth and inflation were both nudged higher this year and next. At the same time, medium-term unemployment rate projections moved lower. Together, we feel this suggests that labor market conditions — not inflation — were the main driver behind the Fed’s decision to cut rates.
In the press conference, Fed Chair Jerome Powell described this move as a “risk management” cut — meaning it’s preventative rather than reactive.
What does this mean for portfolios?
First, bonds. When the Fed begins an easing cycle, bonds in the middle of the curve — around three to seven years — often strike the right balance of income and protection if rates continue to move lower. Investors can consider options like the iShares 3–7 Year Treasury Bond ETF, or a diversified approach to maximize long-term income with the iShares Flexible Income Active ETF.
Second, U.S. stocks. Discount rates fall when the Fed cuts, which benefits growth stocks, especially in technology. A strategy that focuses on quality growth at reasonable prices, like the iShares MSCI Quality GARP ETF, can help target the areas most likely to benefit.
Third, international markets. Fed rate cuts often put downward pressure on the U.S. dollar, which can be a tailwind for international equities. Broad exposure through the iShares Core MSCI Total International Stock ETF allows investors to tap into those opportunities across developed and emerging markets.
Finally, alternatives. Gold remains one of our preferred assets in this environment. Falling real rates and still-sticky inflation support its role in portfolios. On the far end of the risk spectrum, Bitcoin has also tended to perform well during past Fed easing cycles, though investors should treat it as a much higher-risk asset.
Thanks for watching, and head over to iShares.com to read our new article on what this easing cycle means for portfolios.
Disclosures:
Source: Quotations from the Federal Reserve September FOMC Meeting Press Conference on September 17, 2025. Views are subject to change.
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