Fed Rate Cuts: Why Stocks Risk Sticky Inflation, Job Pain

No, rate cuts don’t magically fix everything

Quick reality check: a Fed rate cut changes the price of money fast. It doesn’t rewrite wage contracts, renegotiate your office lease, or refill a retailer’s margin in time for Black Friday. I’ve seen too many investors chase the first cut like it’s a green light, only to get sideswiped by sticky prices or a pickup in layoffs. And yes, I’ve worn that t‑shirt, twice. The plumbing of credit responds quickly; real-world balance sheets don’t.

Here’s what you’ll actually get out of this section, and I’ll be blunt about it because it’s Q4 and we don’t have time to be cute:

• Financing costs move first. Credit card APRs track prime; they don’t wait around. The Fed’s G.19 data showed average APR on cards assessed interest at 22.8% in Q4 2024. Cuts help, but that number doesn’t drop to 12%, lenders keep wide spreads when risk is rising.
• Inflation and hiring don’t flip on a Fed headline. Shelter is roughly 34% of the CPI basket (BLS weight, 2024), and shelter inflation has a well-known lag because leases renew over months and years. Payroll adjustments are similar, HR budgets aren’t rewritten on Wednesday because Powell spoke on Tuesday.
• Stocks don’t always rip on the first cut. History is awkward. After the first cut in January 2001, the S&P 500 was lower a year later (roughly the low teens in percent terms), and after the first cut in September 2007, the index finished 2008 down 38%. Profit margins, credit stress, and earnings revisions carry more weight than a single 25 bp move.
• Households feel cuts unevenly. Borrowers with floating rates see relief first; savers, landlords, and retirees on fixed income see their yield erode faster than their costs. And with the vast majority of U.S. mortgages fixed-rate, refi math only works if the drop is big enough to beat fees; plenty of folks stay put.
• Policy lags are real. Textbook estimates for monetary policy to hit the real economy run 6-18 months. Credit conditions and corporate behavior adjust over quarters, not weeks, ask any CFO managing 2025 capex after locking in debt in 2023-2024.

So what are we doing here, right now, this year? We’re separating the quick effects (spreads, new issuance, floating-rate debt relief) from the slow stuff (wages, rents, long-dated contracts). We’ll look at why margins still compress when input costs are sticky, how credit stress can worsen early in a cutting cycle, and, this part stings, why layoffs can rise into cuts when revenue slows. I’ll reference a stat you’re going to side-eye at first, and that’s fine; the point is to set expectations to realistic not optimistic.

Rate cuts are helpful. They’re not a time machine.

We’ll map the mechanics, bring in a few concrete data points (including what the BLS and the Fed published last year), and flag where markets routinely overreact. If you want a simple “Fed cuts = everything rallies,” you won’t get it here. You’ll get something better: a playbook that actually survives Q4 earnings season.

Where we actually stand in 2025: policy, prices, and jobs

Quick reset. Inflation crested at 9.1% year-over-year on headline CPI back in June 2022 (Labor Dept.), then cooled through 2023-2024, but it didn’t fully normalize. This year has been choppy, headline looks fine for a month, then shelter and services keep the floor sticky again. In plain English: the easy part (goods disinflation) mostly happened, the hard part (services and rent) is hanging around.

On inflation specifics: headline CPI has bounced between roughly 3% and 4% at times in 2025. Shelter CPI is still running near 5% YoY in recent prints, which is the piece that refuses to roll over on cue even with private rent indices showing earlier softening. Core PCE, the Fed’s preferred gauge, has hovered around 2.7-3.0% YoY lately (BEA), better than last year but not “mission accomplished.” Goods helped a ton earlier, core goods inflation dipped negative year-over-year for parts of late 2024 and early 2025, but that tailwind is fading because inventories normalized and freight isn’t falling like it did, so you don’t get another free round of price cuts on big-ticket stuff.

Policy-wise, the Fed is easing into a cooler labor market, but they’re doing it carefully. We’ve had about 75 bps of cuts this year, taking the fed funds target from the late-2024 peak (5.25%-5.50%) to something closer to 4.50%-4.75% now. Important nuance: credit is still tighter than pre-2022. The Fed’s Senior Loan Officer Opinion Survey in 2025 shows a positive net share of banks keeping standards tight versus 2019 norms, and loan demand from firms is soft. Translation: even as policy rates inch down, bank underwriting, higher term premia, and those not-so-cheap spreads keep a lid on hiring and capex. Rate cuts help, they’re just not a time machine, and I know I’m repeating myself but it matters.

Jobs next. The unemployment rate has moved up to around 4.4% this fall (BLS), versus roughly 3.9% last year. Not a crisis number, historically that’s still low, but direction matters. You can see it in quits, temp help, and hours worked softening at the margin; firms are protecting margins by trimming around the edges first, then they wait, and only then do they consider bigger staff changes if revenue doesn’t re-accelerate. Wage growth has cooled from the 2022 highs, but it’s still running above where you’d peg “clean 2% inflation,” which is why services inflation keeps a base under the aggregate prints. Call it around 4% wage growth give or take, depending on your series.

Markets, well, markets are trading the data one print at a time. We’ve had multiple days this year where the 2-year Treasury jumped 15-25 bps intraday on a CPI beat or a hot payrolls revisions mix. Fed funds futures have yanked the 2026 path up and down by about 25-50 bps multiple times since spring. That’s what happens when unemployment drifts higher while inflation progress is uneven: the rate path isn’t linear. Some weeks we’re in soft-landing mode (lower inflation, decent growth), other weeks it looks like stall-speed (softer hiring, sticky services prices, capex on pause). I get why people are whipsawed, I feel it too when I’m staring at my screen at 8:31am.

Here’s how I’m framing it for Q4 decisions, and yes this is a bit of a run-on because that’s how the cycle actually behaves: the Fed is easing but standards and spreads are still tight, inflation is lower but services and shelter keep it sticky, unemployment is higher than last year and inching up, and goods disinflation isn’t the cavalry anymore, so earnings resilience depends on cost control and pricing power, not on policy bailing everyone out overnight.

Rate cuts are helpful. They’re not a time machine.

• Inflation peak: 9.1% YoY CPI in June 2022 (BLS); 2025 headline swinging ~3-4% with shelter near 5%.
• Policy: about 75 bps of cuts this year; fed funds near 4.5-4.75%, but credit still tighter than 2019 per SLOOS.
• Labor: unemployment around 4.4% now vs ~3.9% last year; wage growth near 4% keeps services sticky.
• Markets: 2-year swings 15-25 bps on data days; futures shift 25-50 bps on each print, no straight lines when jobless ticks up.

One last human point: tighter credit with easing policy feels contradictory, but it’s exactly what happens late cycle, banks reprice risk, CFOs pull back on projects, and the macro “average” can look fine while the tails get noisy. That’s where we’re operating, and that’s the playbook I’m using into year-end.

Why inflation stays sticky even as growth cools

Here’s the annoying part. The big chunks of inflation that matter right now don’t move on a Fed-meeting schedule. They move on leases, contracts, and regulated price filings. So even with growth cooling and rates a bit lower this year, the disinflation in services comes with a lag. Sometimes a long one.

• Shelter: the lease math. CPI shelter is still running near ~5% year over year in 2025 (BLS), even though new-lease rent growth cooled a lot last year. Why? Because most tenants renew annually. Only a slice of leases reset each month, so the official shelter gauge “catches up” slowly. If market rents softened in late 2024, it filters through during 2025-early 2026 as those leases roll. That’s why you can see Zillow-type new-lease measures cool, while CPI shelter stays firm. It’s not a contradiction; it’s timing.
• Services wages: sticky, but easing. Wage growth has stepped down, but not collapsed. We’re still around ~4% this year on broad measures, which is better than the 5%+ pace in 2022 but still above the pre-2020 norm. The JOLTS quits rate slid to roughly the low-2% range this summer 2025 (BLS), which takes pressure off pay, yet service firms don’t rewrite compensation grids overnight. Think menu costs for payroll. It takes a few quarters of calmer churn before unit labor costs really settle.
• Insurance and healthcare: 2023-2024 step-ups still bleeding in. Auto insurance soared in 2023-2024, BLS prints had year-over-year gains near 20% at points in 2024, and many policies renew on 6-12 month cycles. Those increases flow into what households are paying across 2025. Healthcare is similar. After the health-insurance methodology reset in late 2023, medical services inflation moved back into the ~2-3% YoY zone in 2024-2025 (BLS). Contract cycles with providers and insurers mean today’s costs reflect last year’s negotiations. Not fun, I know.
• Commodity and freight whiplash. Headline inflation still jumps when energy pops. Earlier this year, oil and gasoline bounced on supply scares, then cooled, then bounced again. Shipping has been choppy too: the Drewry World Container Index more than doubled at points in early 2024 amid Red Sea rerouting, and we had another flare-up this year before rates eased back. Even if core is easing a bit, a few months of higher pump prices can re-ignite headline prints. Traders notice; breakevens do, too.

Quick pause, because this can sound contradictory. Growth is slowing, labor is loosening, and yet prices don’t fall in a straight line. That’s normal. Services inflation is about people and contracts, not spot screens. You can cut fed funds 75 bps and still have a landlord pulling a 4% renewal because last year’s comps were hot and their insurance bill just jumped.

Rate cuts help. Calendars and contracts decide the pace.

CircIing back to shelter: if spot rents stay tame into winter, the shelter index should grind down as 2025 renewals stack up, but it won’t be instant. Same with wages, lower quits today shows up in pricing later. And yes, this is getting nerdy. The point is simple: timing frictions keep inflation sticky even when growth cools, and that’s why the market keeps whipsawing 15-25 bps on data days while we wait for the lag to do its job.

Bonds are back, but pick your spots: duration, credit, and TIPS

I’ll keep it simple first, then I’ll get nerdy. With the Fed easing and the labor market cooling, bonds do what they’re supposed to do again. But the mix matters. Rate cuts help duration when growth fades, while a softer job market can pressure credit. Same environment, different levers.

• Own some duration for the growth downside. If unemployment drifts higher, intermediate Treasuries tend to rally as the market leans into slower nominal growth. Back-of-the-envelope: a 6-year duration note picks up ~0.6% in price for every 10 bps rally. So if 5s rally 50 bps on weaker data, you’re looking at roughly +3% price plus carry. Not magic, just math.
• But don’t be naked to spread widening. Credit spreads usually widen when jobless claims trend up. In the 2020 recession, U.S. high-yield OAS blew out by over 700 bps at the extremes; in milder slowdowns you still see 100-200 bps of widening. Last year (2024), S&P Global put the U.S. speculative‑grade default rate near ~5% on a 12‑month trailing basis, and historically defaults peak 2-4 quarters after the unemployment rate turns higher. The lag is real.
• Barbell it: T‑Bills for flexibility + intermediate Treasuries for convexity. I like 3-6 month T‑Bills as dry powder while the path of cuts gets priced and repriced. Then pair that with 5-7 year Treasuries where you actually get meaningful duration. Bills keep reinvestment optionality if inflation flares; the belly gives you the upside if growth undershoots. A simple, boring barbell can outrun a single 3-4 year “compromise” ladder in this kind of tape.
• TIPS where breakevens look light. Don’t trade headlines, watch breakevens. As of late September 2025, 5‑year TIPS breakevens have hovered roughly in the 2.3-2.4% range, and 10‑year near the low‑to‑mid 2s. If you think realized CPI averages above that, say because services and insurance premia are sticky, owning TIPS makes sense. For context, core CPI ran 3.9% year‑over‑year in December 2024 (BLS), and while it’s cooled this year, service categories haven’t collapsed. My take: size TIPS when breakevens dip toward the low‑2s; trim when they stretch toward 2.6%.
• High‑yield and loans: tempting yields, awkward timing. Yes, coupons look great. But leveraged loan and HY defaults tend to lag the labor data. S&P/LCD’s historical work shows the loan default rate typically rises quarters after policy easing begins, not before. If unemployment is edging up, you usually haven’t seen the peak in defaults yet. If you play here, consider moving up in quality (BBs), shorter maturities, and avoid concentration in cyclical single‑B capital structures. Mezz-y stuff can go from 99 to 85 in a hurry when EBITDA misses meet tighter financing windows.
• Munis for taxable investors: use ladders. A 5-10 year ladder in AA/A general obligation and essential-service revenue names keeps duration reasonable and reinvestment rolling. Tax math matters: a 3.25% muni yield can equate to ~5.9% taxable‑equivalent yield for a top-bracket filer with a 45% combined marginal rate (TEY = muni yield / (1 − tax rate)). State taxes are not a footnote, California’s top bracket is 13.3% and New York’s can top 10% depending on city. Prefer in‑state paper where it makes sense, and watch AMT exposure on private‑activity bonds if you’re subject to AMT. Nobody loves an April surprise.

One more thing, context. Earlier this year we got 75 bps of cuts, breakevens stayed stubborn, and unemployment ticked up from the lows. That mix argues for being long some duration while keeping credit beta modest. If the economy softens harder, the Treasury barbell and TIPS do the heavy lifting. If inflation re-accelerates, your Bills let you reset quickly. It’s not elegant, but in practice it works. And yeah, I just said “convexity”, that’s the fancy way of saying the belly of the curve pays you more when rates move, especially on big down‑moves.

Own duration for the downside, rent credit, and let breakevens, not headlines, tell you when to own inflation.

Real-life money moves: mortgages, savings, and debt in a cutting cycle

Policy cuts feel abstract until they hit your mailbox. Here’s where it gets practical. We’ve had 75 bps of Fed cuts earlier this year, and markets are pricing more, but spreads are sticky and lenders are not charities. You still need the math.

Mortgages & refis. Rate cuts can reopen the window, but only if the break-even works for your actual life. Typical refi costs run ~1-2% of the loan amount (plus any points). A quick framework:

• Break-even: Total closing costs ÷ monthly payment savings. If you pay $6,000 to save $250/month, break-even is ~24 months. If you might move in 18 months, that’s a no from me.
• Points: Roughly 1 point (1% of loan) might lower the rate by about 0.25%, give or take. Worth it if you’ll stay long enough; not if you’re likely to sell or refi again.
• ARMs vs fixed: If your horizon is 3-7 years, a well-priced ARM can make sense. If you’ll be in the house “forever-ish,” fixed still buys sleep. And yes, check the caps on ARMs, lenders love fine print.

Context: the 30-year fixed has drifted down from last year’s peak toward around 7% depending on credit score and points, but the spread to Treasuries is still wide by historical standards. That spread is why your quote may not fall as fast as the headlines suggest.

Savings & ladders. High-yield savings APYs are easing, many online accounts that paid near 5% in late 2023 are closer to ~4-4.5% now, and they tend to follow cuts with a lag. If you hate watching yield slip, ladder part of your cash:

• CD/Treasury ladders: Stagger 3, 6, 12, and 18-month CDs or T-Bills. You preserve some yield while keeping monthly or quarterly liquidity. Treasuries are state-tax free, which matters if you’re in California or New York.
• Emergency fund still matters: With the job market softening, unemployment has moved off the lows into the mid-4s in 2025, the value of cash went up, even if the yield went down. I know it’s boring. Boring pays rent during layoffs.

Variable-rate debt: attack first. This is the silent killer in a cutting cycle because banks don’t pass cuts through 1:1. The prime rate typically moves with Fed funds, but card APRs keep a fat margin. Fed data showed the average credit card APR near 22.8% in late 2024 (FRB G.19), and households were still paying north of 20% earlier this year. HELOCs float off prime too; after 75 bps of policy easing, prime roughly went from 8.50% to 7.75%, yet many HELOCs are still 9-10% depending on margins and fees.

Order of operations for most people:

1. Keep 3-6 months of core expenses in cash (12 if your income is cyclical or you’re in sales/commission heavy roles).
2. Pay down variable-rate debt aggressively, cards first, then HELOCs, before throwing extra at fixed mortgages in the 3-4% vintage bucket.
3. Only then look at prepaying a newer 6-7% mortgage versus investing. That’s a risk/return and taxes conversation, not just a rate comparison.

Insurance: don’t set-and-forget. Premiums have been climbing since 2023-2024. The BLS CPI showed motor vehicle insurance running near +19% year-over-year at points in 2025, and homeowners premiums have seen double-digit increases in many states since 2023. Shop carriers and adjust deductibles proactively this year; bundle where it actually saves, not just because the postcard said so. Small sidetrack, document your belongings with a quick video walk-through. Claims adjusters love evidence, and it takes five minutes.

Bottom line: cuts help, but frictions matter. Run a real refi break-even, lock some yield with ladders before APYs drift lower, and kill variable-rate balances. The macro is the wind; your household balance sheet is the sail. Keep it tight.

Portfolio playbook for mixed signals: three scenarios to plan around

I’m not pitching hero trades here. Just risk-aware tilts that don’t blow up Thanksgiving. The economy’s still sending crossed wires, rate cuts starting to show up against sticky pockets of inflation and a softer labor tape (the keyword everyone’s using is exactly that: fed-rate-cuts-sticky-inflation-and-rising-unemployment). When signals argue, I map it to three paths and pre-wire my actions. Keeps me from futzing with the portfolio at 10:17am because a headline spiked my cortisol.

• Soft-landing (growth cools but stays positive, inflation grinds lower): run modest duration in core bonds, think intermediate Treasuries and high-quality IG, not a duration moonshot. In equities, keep a quality tilt: profitable cash generators with healthy free cash flow and pricing discipline (yes, boring often wins). Keep a sleeve of TIPS; even with inflation easing, the inflation accrual and diversification help. Quick data point: the VIX has averaged roughly ~19 since 1990 (CBOE history); when it sits well below that, call it the low teens, index options tend to be cheaper, making hedges more cost-effective in this base case.
• Hard-landing (growth contracts, unemployment rises): add duration and lean into Treasuries. If the economy cracks, long sovereign duration typically does the heavy lifting. Upgrade equity quality again (fees and fundamentals matter a lot here); cut high-beta and trim lower-quality credit, defaults lag, but they do show up. If values dip, consider tax-loss harvesting (TLH). For context: the classic 60/40 (S&P 500 + Bloomberg U.S. Aggregate) dropped roughly 16-18% in 2022 by many benchmarks, losses like that, while painful, created meaningful TLH opportunities that funded future gains.
• Stagflation‑lite (growth meh, inflation sticky): emphasize TIPS and real assets (commodities, select listed infrastructure). Shorten credit, minimize spread duration so you’re not eating both inflation and widening spreads. Keep equity exposure, but tilt to sectors with genuine pricing power and durable margins, think select healthcare tools, software with net-dollar retention, staples with brand moat (not the zombie brands). Historically, when breakeven inflation stays resilient, these sleeves cushion the chop, I’m not claiming a perfect hedge, just a better batting average.

Simple hedges, not heroics

• Index collars or put spreads: Sell a covered call to finance a put (collar), or buy a put spread on the S&P 500 or your primary index. When implied vol runs below its long-run average (again, VIX sub ~15), the math usually improves. I prefer quarter-end maturities, clean for rebalancing and taxes.
• Dry powder in T‑Bills: Keep a small reserve for rebalancing. Last year and earlier this year, 3-6 month T‑Bills frequently yielded north of 5% (Treasury auction data), which made “waiting” less painful. Even if yields slip this quarter, short bills still beat idle cash. Use that bucket to buy dips, not to time markets.

Rebalance rules beat gut feel

Set bands and automate where you can. A simple 5% threshold around target weights (e.g., a 60/40 triggers at 55/45 or 65/35) forces buy-low/sell-high behavior without debate. Quarterly checks plus drift bands work well; monthly is overkill for most. I’ve tested this a bunch, every time I “felt” smarter than the rules, the rules won. Not every quarter, but over cycles.

Allocation cheat notes (how I translate all that into actual trades):

• Soft-landing: intermediate duration core bond fund, quality equities, keep TIPS at say 10-15% of the bond sleeve.
• Hard-landing: add long Treasuries (even a 20-30% slice of the bond sleeve), upgrade to mega-cap quality, reduce high-beta/levered credit, harvest losses if they appear.
• Stagflation-lite: TIPS and real assets up, credit shorter, equities skewed to pricing power sectors; keep cyclicals but size down.

None of this is fancy, and that’s the point. System beats heroics. Plan the trades while vol is calm; execute when your rules tell you to, then go walk the dog.

Play the field, not the last headline

Here’s the bigger picture I keep taping to my monitor: compounding beats timing, and policy cycles are messy. Rate cuts feel good because they ease financial conditions, but they don’t flip earnings or employment overnight. That’s not negativity, that’s a calendar. History is blunt about this. After the Fed began cutting in 2001, the S&P 500 was down roughly 16% over the next 12 months; after the first cut in September 2007, the next 12 months were about -19%. Cuts helped liquidity, not instant prosperity. And in 1995, with a benign backdrop, cuts coincided with strong equity gains over the following year. The point isn’t to cherry-pick; it’s to remind ourselves that the “cut” is not the outcome. The cycle and your process matter more.

And circling back to something I hinted at earlier: time horizon is your real edge. Matching assets to liabilities sounds boring, I know, but it’s how the compounding shows up. Cash for near-term bills, short bonds for next-year needs, diversified risk assets for money you won’t touch for 5-10 years. When the headlines scream about “fed-rate-cuts-sticky-inflation-and-rising-unemployment,” your runway decides your posture, not the headline. But yes, the gray area: sometimes inflation sticks while unemployment drifts up and earnings estimates shuffle lower. That’s exactly when discipline matters.

Two data points I actually trust for this conversation: J.P. Morgan’s 2023 Guide to the Markets shows that from 2003-2022, an investor missing the 10 best days saw annualized returns drop from 9.8% to 5.6%. Translation: being mostly invested most of the time beat trying to nail the perfect macro call. And fees still compound, just in the wrong direction. Morningstar reported the asset-weighted expense ratio for U.S. funds fell to 0.37% in 2023. Low costs help; they don’t guarantee anything, but they give you a tailwind every single year.

Keep the boring stuff boring (because that’s the stuff that works):

• Cash plan: Segment 3-6 months of essential spending in T-bills or an insured high-yield account; businesses often need 6-12 months of operating cash. Refill this, don’t stretch it chasing yield when risk markets are wobbly.
• Match assets to liabilities: Money needed within 2-3 years stays in cash/short/intermediate bonds. Money for 5-10+ years can ride equity and credit risk. Time horizon is the edge, not the forecast.
• Stay diversified, keep costs/taxes low: Use broad funds, mind that ~0.37% asset-weighted fee backdrop as a benchmark. Harvest losses when available to offset gains; avoid short-term gains unless you must. Small frictions add up, every year.
• Let rebalancing do the heavy lifting: Quarterly checks with drift bands enforces buy-low/sell-high without gut-feel heroics. It’s slow, and that’s the point.
• Protect the downside: Position sizing first, quality bias when growth slows, and keep some ballast. In 2008, long Treasuries rose roughly 20-25% while equities sank, imperfect hedge, but a real one. When you stick to process, the upside tends to take care of itself.

One more thing I’ve learned the hard way after a few cycles, including this year’s awkward mix of easing policy and uneven data: cuts help liquidity, not earnings on a dime. Earnings react with a lag, labor reacts with a lag, and sentiment overreacts right away. Keep your cash plan, your risk budget, and your tax habits boringly consistent while the noise spikes. System over heroics. Again.

Process is the parachute you pack on sunny days. You only discover you needed it after the drop.

Frequently Asked Questions

Q: Should I worry about my credit card rate changing right after a Fed cut?

A: Yes, but don’t expect miracles. Card APRs track prime, but banks keep fat spreads when risk is up. Pay down revolving balances first, ask for a rate review, and consider a 0% transfer only if the fee < the interest you’ll save in 6-12 months.

Q: How do I adjust my budget if inflation stays sticky but rates are falling?

A: Treat it like a two-lane road. Lane one: attack variable-rate debt (cards, some HELOCs). Even with cuts, card APRs were 22.8% in Q4 2024 (Fed G.19), and lenders won’t rush to trim margins. Auto-pay the minimum plus a fixed overpayment. Lane two: contain sticky costs. Shelter is ~34% of CPI (BLS 2024) and adjusts slowly because leases renew over months. If your lease is up Q4/Q1, negotiate early, offer longer terms for a lower monthly, and check concessions. Lock in utilities where fixed plans are cheaper than spot. Build a small “price shock” buffer, one extra pay period of cash covers surprise hikes without swiping plastic. If you invest, rebalance toward quality balance sheets and positive free cash flow; lower rates don’t fix weak margins. I learned that the hard way in ’01 and again in ’08, expensive t‑shirts.

Q: What’s the difference between how markets react to a first Fed cut and what happens in the real economy?

A: Markets move on expectations; the economy moves on contracts. Equities can pop on a cut, but history is messy. After January 2001’s first cut, the S&P 500 was lower a year later; after September 2007’s first cut, 2008 finished down 38%. Meanwhile, the real economy digests changes slowly. Shelter inflation is sticky because leases roll over months; payrolls adjust on annual budgets, not a press conference. Credit conditions can ease quickly, but earnings, margins, and default rates set the tone. Practical takeaway: don’t chase a single 25 bp headline. For portfolios, tilt toward firms with net cash, resilient gross margins, and pricing power. Keep a buy list and scale in on earnings-backed dips, not just rate headlines. And hold some dry powder; liquidity lets you pick your spots instead of buying the pop and regretting it Thursday.

Q: Is it better to refinance my mortgage now or wait if the Fed starts cutting?

A: It depends on the size of the drop, your fees, and how long you’ll stay. Most U.S. mortgages are fixed, so you only benefit if you refi. Rule of thumb: consider refiing when the new rate is ~0.50-0.75 percentage points lower and you’ll break even on closing costs within 24-36 months. Example: You owe $400,000 at 6.75% with 25 years left. New offer: 5.875%, $4,000 in fees. Monthly drops from about $2,756 to $2,534, ~$222 savings. Break-even ≈ $4,000 / $222 ≈ 18 months. If you’ll stay 3+ years, that’s solid. If fees were $8,000, break-even is ~36 months, borderline if you might move. ARMs are different. If your ARM resets in 6-12 months and caps allow a big jump, locking a fixed rate after a couple Fed cuts could still be cheaper than waiting for the perfect bottom. Don’t buy points unless you’re very likely to stay past the point’s breakeven (often 4-6 years). And avoid cash-out unless your blended after-tax cost still beats alternatives. I’ve waited for “one more cut” before and watched Treasury yields bounce on a hot CPI print, poof, rate window gone. If the math works today, take the win; if not, set rate alerts and be ready with a full doc package so you can move fast when pricing improves.

@article{fed-rate-cuts-why-stocks-risk-sticky-inflation-job-pain,
    title   = {Fed Rate Cuts: Why Stocks Risk Sticky Inflation, Job Pain},
    author  = {Beeri Sparks},
    year    = {2025},
    journal = {Bankpointe},
    url     = {https://bankpointe.com/articles/fed-cuts-inflation-unemployment/}
}