Fundstrat
Fundstrat's Tom Lee: Fed Cut Sparks Bullish Breakout
9/19/2025, 3:13:27 PM
Economic Summary
- The Fed cut rates by 25 basis points with dovish guidance, explicitly saying risks have shifted toward the labor market; this begins an easing cycle that is supportive for risk assets.
- August jobs report and August CPI were interpreted as dovish by markets, helping justify the Fed's easing stance and underpinning the recent equity rally.
- Market reaction: broad gains led by the NASDAQ (about +1%) and small caps (~+2.5%) on the day after the FOMC decision, with expectations for follow-through.
- Carson Research noted that when the Fed cuts near all-time highs, markets had 12-month gains 100% of the time, providing a bullish historical analog for future returns.
Bullish
- Dovish 25 bps Fed cut supports further equity gains
- Historical pattern: cuts near all-time highs preceded strong 12-month returns
- Tech and small caps led the rally (NASDAQ up, small caps up ~2.5%)
Bearish
- Risks have shifted toward the labor market, implying potential job weakness ahead.
- Consensus expected a down September, reflecting lingering economic uncertainty and downside risk.