Fed Rate Cuts Déjà Vu: The Ghost of Cycles Past
It’s fitting that the Fed’s latest move landed on Halloween week. Rate cuts have a way of coming back from the dead.
The Federal Reserve cut rates by 0.25% in October to a range of 3.75% – 4.00% and will halt balance sheet reductions in December. That’s a pivot, but not a victory lap.
I’ve now worked through three full tightening cycles in my career, and each one ended the same way.
- Greenspan (2004–06): 17 hikes before the housing bubble burst.
- Yellen and Powell (2015–18): 9 hikes before the 2019 “insurance” cuts.
- Powell again (2022–23): 11 hikes to 5.25%, now easing as growth slows.
That’s 37 hikes over two decades – each cycle ending only when the economy or markets cracked. This one feels no different. The latest cut came against a backdrop of slowing job growth, cautious consumers, and another fiscal standoff. But the message from Powell wasn’t “mission accomplished.” It was “don’t get ahead of yourselves.”
Powell Slams the Brakes
The Fed just cut rates – and then instantly threw cold water on another one. Powell told investors that a December cut “is not a foregone conclusion – far from it.” Markets had been pricing a 94% chance of another move. After his comments, those odds dropped near 50%.
Why the hesitation? Two reasons.
First, inflation is heading back up. It’s near 3% and has risen for five straight months. Powell reaffirmed the 2% target and said the recent uptick makes it tough to justify further cuts.
Second, the labor picture isn’t collapsing. The government shutdown has stopped official data from coming out, but the Fed still receives weekly unemployment claims from state systems, and there’s no major sign of weakness.
In short, Powell’s message was blunt: Yes, we cut. No, we’re not rushing to do it again.
Frankly, I’m surprised the market as represented by the S&P 500 index didn’t sell off harder on that line after bouncing up nearly 3% over the past week.
What this means for investors:
•Cash yields will fall. The 5% CDs and money markets are living on borrowed time.
•Bonds are back. Falling yields lift prices; intermediate maturities now make sense again.
•Equities get selective. Lower rates help, but profit strength matters more than headlines.
•Volatility will rise. Markets love cuts until they realize why the cuts happened.
The Fed manages risk by setting short-term rates. Markets set long-term rates through the 10-year Treasury, which drives mortgage costs, corporate borrowing, stock prices, and bond valuations. Our job as advisors is to manage exposure, not forecasts. Success now depends less on predicting Powell’s next move and more on keeping your portfolio steady through the noise.
Jon here. We don’t appear to be heading into a crash or recession, but into a more volatile phase that demands strategy and flexibility. This is not the time for a set-it-and-forget-it mindset or a heavy tilt toward any one sector, especially tech.
Managing your portfolio into 2026 may call for a stagflation-lite approach. A globally diversified, balanced portfolio with a tactical tilt that includes alternatives can help manage risk through the next storm or correction. On the bond side, pay close attention to duration, sectors, and credit quality to guard against possible re-inflation. Those details matter more now than ever. Those details matter more now than ever looking back on fixed income results since 2020.
The Ghost of Volcker
The Fed may have cut, but inflation isn’t finished. Core prices remain above target, housing costs are stubborn, and wage growth has not cooled. Powell risks repeating Paul Volcker’s most famous mistake: easing too soon.
Volcker’s warning still holds. Early easing can reignite inflation and force a harsher reversal later. This time, politics could make that outcome even messier.
If Trump and his administration follow through with broad tariffs- roughly 10 to 15% on most imports and as high as 50% on Chinese goods, prices could climb again. Yesterday Trump said that after meeting with Xi Jinping, existing tariffs on Chinese goods will stay largely intact. The average duty will hover near 47% down slightly from 57% as part of a trade-truce deal that includes Chinese commitments to buy U.S. farm and energy exports.
Even if the Supreme Court blocks new levies, refunds of nearly one trillion dollars already collected could strain Treasury funding and weigh on U.S. credit ratings. Either outcome complicates Powell’s job and may keep long-term yields higher for longer. Those same inflation and policy crosscurrents are now showing up in the bond market.
Steepening Curve
While most headlines focused on the October Fed rate cuts, the more important story may be the yield curve quietly steepening. Long-term Treasury yields have climbed even as the Fed eases, driven by foreign selling, fiscal strain, and renewed inflation expectations. The gap between short- and long-term bonds is widening -a clear sign investors want more compensation for tying up their money.
A steepening curve can reflect optimism about growth or concern about inflation. In this case, with tariffs unresolved and official data still blacked out, it looks more like a warning than a recovery signal.
Whether Trump’s tariff hikes are withdrawn or executed at 15 %, we expect greater market volatility and mild reinflation either way. Core inflation (Core PCE) rose in August to 2.9% the highest since February, quietly filtering through the economy. Prices haven’t surged yet because many U.S. companies built excess inventory earlier this year, but the uptick is already dividing Fed officials on how quickly, and how far, to keep cutting rates.
Data Blackout Makes the Fed More Cautious
The government shutdown, now more than 30 days old, has become a major blind spot for policymakers. The Fed is operating without critical data from the Bureau of Labor Statistics and the Commerce Department. Powell compared it to “driving in the fog” and admitted the lack of visibility could make the central bank more cautious heading into December.
Without reliable numbers, the Fed is relying on partial signals like weekly unemployment claims, private payroll reports, and market trends. The uncertainty increases the risk of hesitation or missteps in the months ahead.
Why the Fed Cut in October
The October decision reflects a balancing act between inflation control and economic risk.
•Jobs: only 22,000 added in August; unemployment at 4.3%.
•Inflation: above target for five straight months.
•Data: many government releases delayed or frozen by the shutdown.
•Liquidity: QT ends in December after a $2.2 trillion balance-sheet runoff.
Markets had already priced in the move – now they’re questioning what comes next.
The chart below tracks Fed rate cycles over the past 25 years, showing how every phase of aggressive tightening eventually gives way to easing once the damage surfaces.
This historical perspective helps demonstrate that rate cuts are a normal tool the Fed uses to support economic growth during periods of uncertainty. While near-term policy decisions capture attention, successful investing focuses on long-term trends rather than individual Fed meetings or short-term economic data points.
Bottom Line
Rate cuts dominate the headlines, but the bigger picture is more complex. Fiscal pressure, tariff risk, re-inflation and data uncertainty are pulling markets in different directions.
The chart above is a reminder that policy shifts are part of every cycle. The Fed raises, overshoots, then cuts. Investors who focus on the long game – diversification, balance, and discipline tend to come out ahead.
The Fed can steer policy. You control discipline with your mind and money. Stay diversified, stay flexible, and keep your strategy anchored to long-term goals, not short-term noise.
For more information on our firm or to request a complimentary investment and retirement check-up, call (561) 210-7887 or email jon.ulin@ulinwealth.com.
Author: Jon Ulin, CFP® is the founder and Managing Principal of Ulin & Co. Wealth Management, an independent advisory firm based in South Florida for over 20 years. As a fiduciary wealth advisor, Jon helps successful individuals, families, and business owners nationwide with multi-generational planning, investment management, and retirement strategies. Learn more about Jon and our team at About/CV.
Note: Diversification does not ensure a profit or guarantee against loss. You cannot invest directly in an index.
Information provided on tax and estate planning is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.
You cannot invest directly in an index. Past performance is no guarantee of future returns. Diversification does not ensure a profit or guarantee against loss. All examples and charts shown are hypothetical used for illustrative purposes only and do not represent any actual investment. The information given herein is taken from sources that are believed to be reliable, but it is not guaranteed by us as to accuracy or completeness. This is for informational purposes only and in no event should be construed as an offer to sell or solicitation of an offer to buy any securities or products. Please consult your tax and/or legal advisor before implementing any tax and/or legal related strategies mentioned in this publication as NewEdge Advisors, LLC does not provide tax and/or legal advice. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors.
