Latest / Markets with Megan: A Quick Financial Markets Update / Rate Relief or Reality Check? | S2 E090 | 10-30-25

Transcript

Rate Relief or Reality Check? | S2 E090 | 10-30-25 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Speaker: The Federal Reserve delivered what we've been hoping for yesterday, but maybe not all investors.
• 0:06
  Speaker: It's Thursday, October the 30th, and this is Markets with Megan.
• 0:09
  Speaker: If you like this podcast, you subscribe, hit that alarm bell, share with friends, family, or colleagues.
• 0:14
  Speaker: But we're here today to break down that economic data.
• 0:18
  Speaker: And given that the government is still shut down, we don't get that regular economic data releases to share with you.
• 0:24
  Speaker: But yesterday we did get a pretty important report from the Federal Reserve.
• 0:28
  Speaker: They came in and they cut interest rates by 25 basis points, which was widely expected.
• 0:33
  Speaker: This wasn't the surprise out of the meeting.
• 0:36
  Speaker: What was surprising is they they took a bit more of a hawkish tone, which is something that we've been talking about on this podcast, is that the Fed's getting way too complacent on the inflation environment.
• 0:48
  Speaker: What they said was that the committee actually had very differing views about December.
• 0:54
  Speaker: They mentioned strongly differing views.
• 0:56
  Speaker: And when it comes to the Federal Reserve, every single word is dissected from the markets.
• 1:01
  Speaker: They said the additional cuts are not a foregone conclusion.
• 1:05
  Speaker: In fact, the rate cuts for December are far from it.
• 1:09
  Speaker: And they made that point saying that the expectations for another rate cut, it's far from it.
• 1:14
  Speaker: So the markets should be careful getting ahead of themselves.
• 1:17
  Speaker: Yesterday, the markets didn't necessarily like this report.
• 1:21
  Speaker: And again, we've been warning that the markets were way too optimistic about what the Federal Reserve could do, primarily from the in because of the inflation environment.
• 1:30
  Speaker: Today, though, the bulls are back.
• 1:32
  Speaker: We are seeing, you know, remember we're in the height of earnings season, so we are seeing some optimism there from the earnings reports.
• 1:39
  Speaker: And we don't have all of the economic data, but the Fed does get some of those regional reports, and they made a note of that in their comments yesterday that they are getting data from their individual regional banks.
• 1:53
  Speaker: So they can get a look at the labor market, they can get a look at maybe what some of the pricing pressures are.
• 1:58
  Speaker: And obviously, something in those reports is spooking them that they took this bit more of a hawkish tone.
• 2:04
  Speaker: Um, now what we've seen as far as inflation really suggests that this is actually a good thing.
• 2:10
  Speaker: The Fed should pause and assess what's going on.
• 2:13
  Speaker: We don't know when the government's going to open back up again.
• 2:16
  Speaker: We don't know when we'll start getting all of the economic data to get that clear picture.
• 2:20
  Speaker: So in this instance where we've seen some inflation pressure starting to creep back into the market, it is smart for the Fed to kind of highlight to investors this is not a done deal.
• 2:30
  Speaker: Don't get so ahead of yourself because we are seeing equity markets specifically making record high after record high.
• 2:36
  Speaker: What we've seen is that you in the CPI report that we did get last week, that did come in better than expected, but you're still looking at the core level, growing 3% on a year-over-year basis.
• 2:49
  Speaker: That's not that's not the Fed's target.
• 2:51
  Speaker: Again, in fact, we've talked about how hard it is to get from 3% to 2%.
• 2:55
  Speaker: And the Fed did mention a lot about inflation expectations, that they're tame.
• 3:01
  Speaker: I I beg to differ with that.
• 3:03
  Speaker: When you look at the in the one-year head inflation expectations on the University of Michigan Consumer Confidence Report, that's stuck at 4.6%.
• 3:12
  Speaker: It's been there for a couple months.
• 3:14
  Speaker: It's not going lower.
• 3:15
  Speaker: So I'm not sure what the Fed's talking about there.
• 3:18
  Speaker: And then when you look at market-based inflation expectations, looking at um break-even rates in the Treasury market, these have also been rising basically in the week leading up to that Fed meeting.
• 3:29
  Speaker: So the Fed's got to be careful what they say here.
• 3:31
  Speaker: There is inflation in this market.
• 3:34
  Speaker: We welcome the fact that they're going to just take a breath and assess and see what's going on.
• 3:38
  Speaker: Um, we do think December still is on the table, but we've seen the expectation for the Fed rate cut in December go from about 95% prior to the meeting to now only 70%.
• 3:50
  Speaker: Um, the the 2026 rate cuts are clearly up in the air as well.
• 3:55
  Speaker: Prior to this, the expectation was for up to five rate cuts in 2026.
• 3:59
  Speaker: That's off obviously been lowered as well.
• 4:02
  Speaker: Now we know we haven't been out regularly as we normally are because we don't have all that economic data, but we will be back when we get instances like this where we feel like it's necessary to update investors of what's going on specifically from the inflation environment, the labor market, and the Federal Reserve.
• 4:18
  Speaker: That's all we have today.
• 4:20
  Speaker: Thank you again for listening.
• 4:21
  Speaker: If you want a history of our podcast, go to marketswithmegan.fm.
• 4:25
  Speaker: Thanks.