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Bullish on Fed Easing?

November 06, 2025

Time to Read: 2 minutes

As expected, the Federal Open Market Committee delivered another 25-basis point rate cut. Investors are now focused on the pace of cuts from here. However, the more important driver of future equity returns is whether the Fed is easing into an economy that is growing or not.

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Last week, the Federal Reserve delivered a widely anticipated 25-basis point rate cut. What caught the market’s attention was pushback by Fed Chair Powell on the certainty of a December cut. But, regardless of the pace of easing from here, history tells us that future equity market performance is positive when the Fed eases into a growing economy.

According to our research dating back to the 1980s, stocks delivered an average gain of 16.5% in the 12 months following the first cut of an easing cycle as long as a recession was avoided. The number ticks up to 44.5% over the first 24 months. While the Fed’s easing arguably started last year, we view the latest cuts and future expectations as a new cycle.

Given our outlook for continued economic growth and improving earnings next year, we expect more equity gains to come.

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Job Market Hanging in There

Recent jobless claims data point to a resilient U.S. labor market, with both initial and continuing claims remaining low and signaling that unemployment is still contained. Although job growth has softened and remains subdued, March’s job growth of 178,000, the highest since 2024, is encouraging. Our constructive outlook still holds despite continued uncertainty related to the war in the Middle East.

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Markets Since Iran Conflict

Markets are reacting to the Middle East conflict with sharp moves across asset classes, signaling broad risk repricing and shifting safe-haven behavior. While volatility is elevated, fundamentals like earnings growth continue to support our constructive outlook.

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Signals from Spreads

Credit spreads have risen yet remain historically low, reinforcing our view that the oil shock is likely temporary — not a driver of long-term growth concerns.

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Dollar Strength: What Does It Mean for Markets?

Geopolitical tensions have lifted oil prices, sent stocks lower and driven flows into the safety of the U.S. dollar, which has strengthened versus peers. While a weaker dollar previously supported international equity outperformance, dollar stabilization now suggests that tailwind is fading, underscoring the importance of diversification across regions and asset classes.

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