We are at this inflection point, and you see that in the decision today.

Well, as expected, the Fed cut rates again today, another quarter point. Marta, what's behind this decision? And do you think we're gonna see more cuts from here? Because, honestly, it doesn't seem like a quarter point lower will actually move the needle very much.

Well, it's interesting because Chair Powell went out of his way in the presser to stress that we are not on a preordained path. There's no guarantee of a December cut. But given the lack of job growth we saw over the summer, I think we are weighted on balance to another cut in twenty twenty five. But I think what we're really looking at is something that calls into question how low rates go in twenty twenty six. In fact, after the decision, what we saw in markets is actually the yield curve moving higher, which suggests that the market is potentially recalibrating its rate outlook.

Yeah. And, Marta, with so much data delayed by the shutdown, the Fed's really only working with part of the picture. So how does that change the way investors might be thinking right now? No.

It it doesn't help to have the government shutdown and no official federal government data. But the Fed does have private market data, and it does have its beige book, which is not determined on the federal government being open. Powell said clearly in the press conference something that I thought was really interesting. He said if there was something meaningful happening to the economy, he believes that the remainder of the data that the Fed does have access to would likely pick up that shift. But, of course, some of the nuances simply aren't there without the official data. What I would say more broadly is that we are at this inflection point, and you see that in the decision today with one person dissenting in favor of a bigger cut and another person dissenting in favor of no cut. And I think that's a sign that in this environment, people should probably hold their economic convictions a bit more loosely.

Yeah. There definitely appears to be some tension inside the Fed. And, Marta, the other big headline today was the Fed is ending its quantitative tightening program.

Now this is really confusing for the average person, so I'd love for you to explain what that actually means and why it matters to us.

Yeah. It's confusing to everyone. Think about it this way. One of the Fed's crisis tools is buying bonds to support the liquidity and pricing and markets in the economy.

That's called quantitative easing. When the crisis ends, and the most recent crisis was the pandemic era, the Fed reduces its balance sheet by letting those bonds that it purchased mature without reinvesting the proceeds. That's called quantitative tightening. This quantitative tightening drains reserves from the banking system.

The Fed wants to stop draining those reserves before the process begins to impact rates in the very short term lending market, which includes money markets or interbank lending. And they think they're at that point right now. Yeah. That makes sense.

And it's really interesting, Marta, because the Fed is stimulating the economy. People are worried about the labor market and inflation, but the stock market keeps climbing higher and higher. So how do you make sense of that, and what ties all this together? It's a super interesting environment that doesn't appear to be following a normal business cycle.

And a big part of the explanation, in my view, is the AI super cycle, which is giving the economy greater support than I think it would otherwise have. That's one of the key reasons I think we're seeing earnings as strong as they've been over the course of twenty twenty five despite the different headwinds that they faced. And it's one of the reasons I think the market shouldn't get too ahead of itself by pricing in too many cuts, at least as we have the current committee makeup as it stands today.

Yeah. That's right. We know president Trump plans to announce his new pick for Fed chair very soon. Marta, thank you for your insights perspective as always, and to all of you, thanks for watching. Keep an eye out for Marta's twenty twenty six market outlook coming right before Thanksgiving. She's gonna dig deeper into how Fed policy, housing, and AI could shape opportunities in the year ahead. Have a great rest of your week, and we'll see you back here soon.