Your 2025 portfolio strategy can't rely on more rate cuts: Strategist
US stocks (^DJI,^GSPC, ^IXIC) are trading lower after the Federal Reserve announced a 25 basis point cut and said it expects to deliver two cuts in 2025. Innovator Capital Management head of research and investment strategy Tim Urbanowicz sits down with Market Domination Overtime co-hosts Julie Hyman and Josh Lipton to examine the market reaction to the Fed announcement. "There is such high expectations across the board" for the market in 2025, Urbanowicz says, explaining, "the expectation for the Fed [is] going to continue on this aggressive pace of cutting without any economic pain. It's great if it plays out, but today, as you see, those expectations pulled back, you see the market pull back." While Fed Chair Jerome Powell indicated that the US economy is strong, justifying the 25 basis point cut at the December meeting, Urbanowicz says, "the big fear is a reacceleration in inflation." The strategist notes that recent data signals inflation progress is stalling, just ahead of President-elect Donald Trump's second term. "I think they're getting nervous about the new administration coming in," Urbanowicz says, noting that Trump's policy proposals, like tariffs and mass deportations, are expected to be inflationary. Overall, the strategist says the market reaction to the Fed meeting underlines that "investors need to be very cautious on their expectations for the Fed ... investors need to really disconnect the need for risk management and interest rates in their portfolio in 2025," as it seems rates will be staying higher for longer than initially expected. To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here. This post was written by Naomi Buchanan.
