Markets Are Forward-Looking — Don’t Misread the Fed Cut Effect
Liz Gibbs

🧭 Market Insight of the Week

“Markets don’t wait for the Fed — they anticipate it.” Too often, analysts and headlines assess the effect of a Fed rate cut starting from the date of the actual decision. But that's not how markets work. They're forward-looking — and pricing starts well before the Fed moves.

🧐 What Just Happened?

  • Fed cut rates on September 17, 2025.
  • ✅ 10-Year Treasury closed at 4.07%
  • ✅ Yields rose slightly to 4.11% the next day
  • 🔍 Why? Jobless claims surprised to the downside (264K → 231K)

Interpretation: Markets saw the drop in claims as a sign that the labor market isn’t as weak as the Fed feared, reducing urgency for more cuts — and blunting downward pressure on yields.

🔍 What Happened Before the Cut?

August 22, 2025 – Jackson Hole Speech:

  • Fed Chair Powell clearly signaled an incoming rate cut.
  • 10-Year Treasury on Aug 22: 4.32%
  • 10-Year Treasury on Sep 17: 4.07%

Mortgage rates also fell significantly due to a narrowing spread.

💡 The move happened before the official cut. This is textbook forward-looking behavior from bond markets.

📉 Flashback: September 2024

Let’s rewind:

  • Fed cut 50bps on Sep 18, 2024
  • In the 2–3 weeks before the cut:
  • 10-year Treasury yield fell sharply
  • Mortgage rates dropped ⅝%

Once again, markets reacted in advance, not in response.

🧠 Takeaway

If you’re measuring the effect of a Fed rate cut from the date of the cut, you’re missing the story. Markets move on expectation, not confirmation.