Richard F. from Santa Barbara, CA asks: Hi Mitch, there’s a lot of talk about whether the Fed will cut by a quarter point or a half point at the next meeting. And also whether they’ll keep lowering in December and beyond. What are your thoughts on this?
Mitch’s Response:
Indeed, the debate over what the Federal Reserve will do next has reached full volume again.
We’re seeing it play out very publicly, with two Fed governors offering starkly different takes recently. Fed Governor Christopher Waller made the argument for another quarter-point cut, while newly appointed Fed Governor Stephen Miran said he’ll push for a half-point cut, citing soft jobs data and growing geopolitical risks. Then a more tempered Fed Chairman, Jerome Powell, made comments about “weighing inflation risks against a softening labor market,” which registers as less dovish than Miran and Waller.1
The trajectory of rates feels like it’s up in the air.
Rate Cut Debates Are Rising — Is Your Portfolio Ready?
The Federal Reserve is split on whether to cut rates by a quarter or half point, and markets are reacting to every word.
But while investors obsess over the next meeting, history shows it’s not rate decisions that define long-term returns. It’s discipline. Our free guide, Navigating Market Volatility: 4 Principles for Staying the Course2, shares the habits and mindset that can help keep your portfolio steady no matter how uncertain the markets become. Inside, you’ll find:
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- Trying to pick market tops and bottoms is nearly impossible
- Trust your strategy and discipline, not the headlines
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But here’s the thing: these policy-setting differences aren’t new, and the Fed rarely moves in lockstep. The Federal Open Market Committee (FOMC) has twelve voting members, each interpreting data through their own lens. The so-called dot plot, which investors use to guess the Fed’s next moves, reflects that diversity of views, and it certainly should not be taken at face value. Even within the Fed, consensus is often more cosmetic than real.
The market, for its part, seems convinced of the path ahead. Futures are pricing in near-certainty of a quarter-point cut at the upcoming October meeting and decent odds of another in December. Yet history shows these probabilities change almost weekly, and markets have been wrong about the future path of rates as often as they’ve been right. That’s because monetary policy isn’t set on autopilot. It’s data-dependent, as policymakers like to say, and new data constantly shift the calculus.
The bigger issue, in my view, is that investors tend to overstate the importance of rate cuts altogether. The Fed can move the short end of the yield curve (overnight lending rates between banks), but it has little control over longer-term rates like 10- or 30-year Treasury yields, which are set by markets and shaped largely by inflation expectations. Those long-term rates are what influence borrowing costs, mortgages, and corporate investment decisions.
In other words, a quarter point here or there at the short end doesn’t necessarily ripple through the entire economy. Long-term yields can rise even as the Fed cuts (as we’ve seen recently), and they can fall even when the Fed hikes. To put it very simply: the market leads, the Fed follows.
As for stocks, the relationship between rate cuts and market direction is not set in stone. Some bull markets have started after rate cuts, others long before. Sometimes the Fed starts cutting during a bull run and continues right into a downturn. There’s simply no consistent cause-and-effect pattern. Markets move on the broader economic and earnings outlook, not the Fed’s meeting calendar. What matters far more to investors is that corporate profits remain resilient, inflation continues to cool, and consumer and business spending hold up. Those are the fundamentals to keep your eye on.
Inflation may be cooling, but its impact is far from over. Even small changes in prices and policy can shift market direction, and catching up after the fact can be costly.
Our free guide, Navigating Market Volatility: 4 Principles for Staying the Course3, explains how disciplined investors stay positioned through changing inflation trends and interest-rate moves, without reacting to every headline. It covers:
- Sharp market declines and corrections are a normal part of investing
- The best market days come unexpectedly (often within days or weeks of the worst days)
- Trying to pick market tops and bottoms is nearly impossible
- Trust your strategy and discipline, not the headlines
- Plus, more insights and assistance to help you keep your investment strategy on course
If you have $500,000 or more to invest, get your free guide today!
Download Your Free Copy Today: Navigating Market Volatility: 4 Principles for Staying the Course4
Disclosure
1 CNBC. October 16, 2025. https://www.cnbc.com/2025/10/16/fed-governor-miran-wants-a-half-point-cut-this-month-while-waller-backs-another-quarter-point-move.html
2 Zacks Investment Management reserves the right to amend the terms or rescind the free Navigating Market Volatility: 4 Principles for Staying the Course offer at any time and for any reason at its discretion.
3 Zacks Investment Management reserves the right to amend the terms or rescind the free Navigating Market Volatility: 4 Principles for Staying the Course offer at any time and for any reason at its discretion.
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