Good morning,
The highlight of the week was the Fed officially beginning a new easing cycle. On Wednesday, it delivered the expected 25 bps cut, bringing the Fed Funds target range to 4.00–4.25%, with the lower bound (4.00%) serving as the reference point. The Fed’s dot-plot signaled two additional 25 bps cuts before year-end—one at each of the final two meetings (10/29 and 12/10). That path would put Fed Funds at 3.50% entering 2026. As always, they emphasized that outcomes remain data-dependent, but for now, the markets and the Fed are aligned: betting markets are also pricing in a 90%+ probability of two more cuts.
When the Fed matches expectations, volatility tends to recede—and that’s exactly what we’ve seen. Equities continue their slow, steady grind higher (S&P 500 +0.75% week-to-date), while the VIX has drifted down to 15, closer to its historical resting level.
Today is the quarterly options expiration, when all stock options, futures, and options on futures expire. With no U.S. economic data releases scheduled, positioning and derivatives flows may be the main drivers of intraday action.
With earnings season behind us and Fed direction clarified, the next potential market catalyst is the looming government shutdown debate. Odds favor another “kick of the can,” but any disruption could inject some short-term volatility.
See you Monday—have a great weekend.
Be well,
Mike