CIO continues to believe that evidence of a weakening labor market should provide justification for more rate cuts in the coming months. (UBS)
The US central bank also confirmed it will stop shrinking its balance sheet on 1 December, as Fed Chair Jerome Powell signaled earlier this month. US equities dipped, however, while Treasury yields rose, as Powell said lowering borrowing costs again in December is "far from" a foregone conclusion, a more hawkish tilt than what the market was pricing. Investors had also anticipated the end of quantitative tightening to start imminently.
Chief Investment Office view: Despite a more cautious Fed, we maintain our view for two additional cuts between now and the early part of 2026, with improving liquidity supporting risk assets. The Fed on Wednesday acknowledged a "somewhat elevated" inflation environment as the economy adjusts to higher tariffs, and Kansas City Fed President Jeffrey Schmid voted to hold rates steady. However, the US central bank also made note of a softer labor market with slowing job gains, adding that the "risks to employment rose in recent months." We continue to believe that evidence of a weakening labor market should provide justification for more rate cuts in the coming months. The Fed’s policy path forward has bolstered the case for quality fixed income as a source of income and portfolio resilience. We recommend investors consider medium-duration high grade government and investment grade corporate bonds. We also expect gold to stay strong and maintain our year-end target of USD 4,200/oz, while an easing Fed should continue to support the backdrop for equities.
Original report – Tech earnings point to sustained AI demand, 30 October 2025.
