A few things are happening here. So since September of last year, one year later, the Fed has now reduced rates by 125 basis points. Yep.And that brings us to 4 and a quarter 4 to 4 and a quarter. The Fed no doubt will go to a neutral rate, which is 3%. So they have 125 basis points to go.So only at the halfway mark. So that's the first thing. It's only eased one time this year.But they have a lot more to go because jobs are slowing. And more importantly, the neutral rate is much lower than the rate we have ...

Core Viewpoint - The Federal Reserve's recent decision to cut interest rates by 25 basis points reflects a cautious approach, avoiding dissent among members, and indicates a focus on future economic conditions, particularly in relation to the housing market [1][2][4]. Interest Rates and Monetary Policy - The Federal Reserve's current stance is to maintain a tight monetary policy, with discussions around the neutral rate being between 3% to 3.75% [3][4]. - Predictions suggest that the Fed funds rate could stabilize around 3% in the coming year, which is expected to significantly impact the housing market [5][4]. Housing Market Dynamics - Approximately 85% of mortgage holders currently have rates below 5.5%, which limits their willingness to move unless rates decrease significantly [5]. - The housing market is perceived to be "locked" until mortgage rates become more favorable, with a target rate of around 5.5% seen as necessary to stimulate movement [6][7]. Market Reactions and Future Outlook - The Russell 2000 index, which includes many small-cap stocks, is showing positive movement, indicating market optimism despite current bond yield levels [8]. - The market tends to price in future conditions, typically 6 to 8 months ahead, suggesting that current stock movements reflect anticipated economic changes [9]. Sector Performance - Sectors such as technology and consumer discretionary are expected to perform better with lower interest rates, as they are more sensitive to financing costs [10][11].

Market Outlook - UBS Asset Management has a bullish outlook on the market ahead of the Federal Reserve's interest rate decision [1] - The firm expects a 25 basis points cut this week, with a total of 75 basis points of cuts anticipated over the next three meetings [3][4] Federal Reserve's Position - There is a significant discrepancy between market expectations and the Fed's projected rate easing, with 150 basis points priced in by the end of next year, while the Fed suggests it will take years to reach those levels [2] - The Fed is facing pressure from hawkish regional presidents who are reluctant to cut rates aggressively, despite Chairman Powell's inclination to ease [4] Labor Market and Inflation - The labor market remains a primary concern for the Fed, with an unemployment rate increase of 8 basis points last month, but initial jobless claims have not spiked yet [6][7] - Inflation is still a pressing issue, and the Fed is monitoring how tariffs and other factors may influence future inflation numbers [12] Economic Segments - The economy is currently characterized by three distinct segments: a recessionary housing market, a booming AI capital expenditure sector, and a resilient consumer market that is expected to slow down [9][10] - The Fed's neutral rate is estimated at 3%, but there is uncertainty regarding its exact level due to varying financial market conditions [10][11]