As expected, the Federal Reserve held interest rates steady this week, a move that surprised absolutely no one including my neighbors. With economic data pointing in every direction at once and FOMC members holding views as diverse as a buffet line, the Fed’s decision to stand pat was less a bold move and more a logical pause.
Chairman Powell, in his usual measured tone, acknowledged something most people been saying for a while that tariffs have a cost, and it is not just a headline risk. “Ultimately, the cost of the tariff has to be paid, and some of it will fall on the end consumer,” he noted, adding that “we know that because that is what businesses say, that is what the data say from the past.”
This is exactly why it makes sense to hold off on cutting rates immediately. Let us see how much of this tariff-driven inflation actually sticks before jumping to conclusions (or cuts). That said, my view remains that we will likely see at least two rate cuts before the year is out particularly as a mild, temporary stagflation period takes shape.
Then there is the Middle East. Rising tensions between Israel and Iran have sent oil prices higher and stirred investor nerves. While it is easy to get caught up in the headlines, we have seen this movie before. Remember the early days of the Russia–Ukraine conflict? The world braced for massive oil shocks, but over time, markets adjusted, supply chains rerouted, and oil prices stabilized.
Unless there is a serious escalation such as disruption in the Strait of Hormuz or a direct hit on critical infrastructure, this is more noise than substance. Still, oil price jumps can sway market sentiment, especially when investors are already jumpy.
We are sweating a bit now, but we will be fine later. Despite all the noise, I remain firmly in the bull camp when it comes to US assets. Yes, we have had a few stumbles. A pullback of 3–5% on Wall Street this summer? That is not a threat, it is a breather. A little consolidation is good for everyone, even markets.
The broader trend remains intact. The bull has not been derailed, it is just jogging instead of sprinting for now. Let the headlines do what they do. We will stick to the game plan.