Fed Cut Rates... So Why Did the Market Fall?

The Fed finally delivered what the market was asking for: a 25 basis point rate cut. This move brings the federal funds rate down to 4.00–4.25%, and yes, traders had already priced this in with near certainty.

So why did the market drop instead of rallying?

The Dow flirted with record highs but reversed. The S&P and Nasdaq also closed weaker. You’d think a rate cut would mean risk-on… but the opposite happened.

Here’s what’s going on beneath the surface 👇

1️⃣ The Rate Cut Was Already Priced In

Markets had been expecting this for weeks. Traders were pricing in a 25bps cut with nearly 98% certainty. When something is fully priced in, it loses its surprise power.

In fact, when the Fed doesn’t overdeliver, markets often sell off. This is classic buy the rumour, sell the news.

So even though the cut came through, there was no wow factor and no new dovish hints that more aggressive cuts were coming soon.

2️⃣ Powell’s Tone Was Still Hawkish

Yes, the Fed cut rates. But Powell made it clear that inflation risks are not gone and the Fed is still data-dependent.

He reminded everyone that core inflation is still above target and that more cuts will depend on future numbers. No “rate cut cycle” was confirmed, this was more of an insurance move than a pivot.

So even with the cut, the market felt a bit... deflated. Like, "That’s it?"

3️⃣ Economic Signals Are Mixed and Confusing

We’re seeing cracks in the labor market, with unemployment creeping up and wage growth slowing. But inflation is still sticky in certain areas like food, energy, and services.

This makes the Fed’s job even harder. Cut too much and inflation might roar back. Hold too tight and growth might stall. It’s a narrow path, and the market is realising we’re not out of the woods.

So What Now?

This is where investors can’t afford to follow headlines blindly.

Rate cuts are not magic. If the macro environment is uncertain, we need to focus on:
✅ Position sizing
✅ Recession-resilient assets
✅ Building a portfolio that can handle rate swings and inflation together

This also reminds us why short-term trading purely based on “expected news” is risky — markets often do the opposite of what’s logical.

Instead of guessing the next move, focus on building high-conviction trades that can play out over the longer term. That’s where real edge comes from.

🎤 Join Me LIVE Tonight at 9PM (SGT)

We’re diving deep into this exact topic in tonight’s Invest with Pete Public Webinar😀 

📉 What the Fed’s move means for your mortgage
📈 How to invest smartly in both stocks and property
🛡️ How to build a portfolio that holds up no matter what the Fed does next

Plus…
🔍 My personal market outlook for the next 6 months
📊 And I’ll reveal my actual portfolio allocation — what I’m holding and why

🗓 18 Sep, Thursday
🕘 9PM (SGT)
👉 Register here: https://us06web.zoom.us/meeting/register/-0S3gqGqQlCACdVBwr--9A

Already more than 200 people registered for it! My zoom capacity is at 300 so do join in early. First come first serve!

See you there live ✌️

Pete
Invest with Pete

🚨‼️ By the way, I’ll never PM anyone on telegram or any other social media platforms. If you receive any “Pete” messaging you, these are scammers impersonating me. Pls beware!

The information provided in this newsletter is for informational purposes only and does not constitute financial advice. Readers should seek their own independent financial advice before making any investment decisions. Please note that while Pete is a portfolio manager, the opinions expressed in this newsletter are his own and do not represent the views of any organization. Always perform your own research and due diligence before investing.