Fed Policy, Tech Momentum, and the New Market Narrative

by Paul Vella of Journey Strategic Wealth, 11/10/25

asset class summary

sector snapshot

Market Backdrop and Fed Dynamics

There’s been a broad-based rally in global equities this year, reinforcing the case for looking beyond the U.S. for diversification. At the same time, relatively muted tariff concerns, recently eased by new agreements with key U.S. trading partners, have alleviated fears of an outsized tariff-related drag on economic growth, further supporting higher valuations.

On the consumer front, core consumer prices, as measured by CPI, rose at a 3% annual rate in September, slightly below expectations. That softer reading initially increased the likelihood of additional Fed rate cuts in late October and December. However, Chair Powell’s more hawkish tone following the October meeting, where he noted that no additional cuts are guaranteed, quickly tempered those expectations. As a result, the 10-year Treasury yield reversed its post-cut decline, climbing back to where it started the month after the Fed delivered its much-anticipated 25-basis-point reduction on October 29.

Let’s unpack this. Inflation is procyclical, meaning it generally moves in line with the business cycle and broader economic growth, at least in simplified terms. As growth accelerates, inflation tends to rise; when growth slows, inflation tends to decelerate. Of course, the relationship is more nuanced, influenced by a range of variables, but this broad framework illustrates the dynamic at play.

When the Fed signals a willingness to cut rates, it aims to reduce borrowing costs and stimulate economic activity. Lower effective borrowing rates can encourage both business investment and consumer spending, which in turn fuels broader GDP growth. Conversely, if the Fed appears hesitant to cut, especially amid limited data availability caused by the government shutdown, investors may gravitate toward safe haven assets like Treasuries. That typically drives Treasury prices higher and yields lower. Yet, since the latest FOMC meeting, yields across the curve, from the 2-year to the 30-year, have actually risen. This suggests investors are demanding a higher term premium for holding longer-dated Treasuries, reflecting uncertainty around inflation and growth prospects in the near term, as well as the Fed’s mildly restrictive stance. It also signals that markets may be pricing in a slower pace of rate cuts ahead.

At present, markets are assigning roughly a 66% probability to another 25-basis-point cut at the December Fed meeting. Combined with the Fed’s recent October cut, this could help offset some of the tariff-related price pressures still impacting consumers. Importantly, the September CPI data remains reliable, as they were collected prior to the government shutdown.