To analyze the impact of the Fed’s rate cut on the bond market, we are going to look at the impact of Treasuries maturing between 2 and 10 years and Treasuries maturing between 10 and 30 years. We will explore the month prior to the Fed’s September meeting and the month after, in order to understand the full impact of the Fed’s decision to cut rates.

Since the last update of our three ‘Tactical Rules’ on June 17th, both domestic and international equity markets have rallied, increasing roughly 6.9% and 3.7%, respectively.

The first half of 2025 has been driven by headlines that have caused volatility in both the stock and bond markets. While tariff negotiations have commanded the most attention, we are now pivoting to the federal budget deficit, which feels like a perpetual headline over the last 15 years.

Currently, the Three Tactical Rules are a “flashing yellow light” - a roughly neutral rating which represents a slight downgrade.

The stock market sell-off appears to be signaling a recession. However, we believe the bond market disagrees.

The Fed could be ‘slower to lower,' while the Trend continues to rise, with an overly optimistic Crowd due to seasonality and post-election trends.

In Europe, the ECB stimulates a sluggish economy while in the UK, the problem is inflation. In contrast, the US responds to stronger growth.

Since our last update of the Three Tactical Rules on June 25, 2024, equity markets have retraced most of the rally from the spring. The change in market sentiment came abruptly, due to the labor market showing signs of weakness as the number of jobs available per unemployed worker fell to 1.2 and the unemployment rate rose to 4.3%. The recent market volatility has had a dramatic impact on our tactical rules.