Investors are closely monitoring the Federal Reserve’s upcoming monetary policy decision scheduled for September 17, with widespread expectations of a modest quarter-point interest rate cut. While this could trigger short-term market volatility, historical trends and current data suggest potential long-term gains across equities, Bitcoin, and precious metals.
The U.S. economy presents a complex backdrop for the Fed’s move. Recent data, including the August Consumer Price Index (CPI) report, showed a 0.4% rise in consumer prices last month, pushing the annual inflation rate up to 2.9%. Key contributors include rising shelter, food, and gasoline costs. Similarly, producer price data indicated persistent inflationary pressures, with the Producer Price Index (PPI) showing a slight monthly dip but a 2.6% increase year-over-year.
Meanwhile, the labor market exhibits signs of cooling. Nonfarm payrolls expanded by a modest 22,000 jobs in August, with losses in the federal government and energy sectors offsetting gains in healthcare. Unemployment remained steady at 4.3%, but labor force participation held at a low 62.3%. Additionally, revisions to previous months’ job growth point to slower momentum, though wage growth persists at an annual rate of 3.7%, maintaining underlying inflation risks.
Bond market reactions reflect these dynamics. The 2-year U.S. Treasury yield stands at 3.56%, with the 10-year at 4.07%, resulting in a modestly inverted yield curve. Futures markets, tracked by CME FedWatch, assign a 93% probability to a 25 basis point rate cut. However, investors may respond to the Fed’s announcement with a “buy the rumor, sell the news” move, as the easing is largely anticipated.
Equities, Crypto, and Commodities Rally Ahead of Fed Decision
U.S. stock markets have been climbing steadily. The S&P 500 recently closed at a record 6,584, up 1.6% for the week and rebounding strongly since late August. The Nasdaq Composite hit five consecutive record highs, supported by large-cap technology gains, while the Dow Jones remains robust despite a slight weekly dip.
Cryptocurrencies and commodities are also benefiting from positive momentum. Bitcoin trades near $115,234, below its August all-time high but maintaining strong gains in 2025 with a total crypto market capitalization reaching $4.14 trillion. Gold prices have surged to nearly $3,643 per ounce, approaching historic highs as investors seek inflation hedges amid declining real yields.
Long-Term Trends Favor Risk Assets Despite Near-Term Uncertainty
Historical analysis from the Kobeissi Letter, referencing Carson Research data, finds that since 1980, in all 20 cases when the Fed reduced rates within 2% of the S&P 500’s peak, the index was higher one year later, averaging gains near 14%. However, the short-term picture is less predictable, with stocks falling in about half of these instances during the month following the rate cut.
This suggests that while investors should brace for some initial turbulence, easing monetary policy could reinforce upward trends in equities, Bitcoin, and gold over the longer horizon. The Fed’s decision carries significant weight given the tension between rising inflation and record-high stock valuations—a delicate balance that could influence market direction for months.
Source: CoinDesk. Read the original coverage for full details.