From News To Moves
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The Fed just cut rates for the first time since last December. Inflation is ticking higher, the labor market is wheezing, and $7 trillion in cash is waiting to move. Here’s your playbook.
By Austin Payne
The Fed cut rates by 0.25 percentage points in September, the first move since December 2024. Powell blamed the fragile labor market, and he may be right: the latest official reports show that hiring has slowed significantly, and unofficial data for September indicate it has come to a complete standstill. (There is no official data for September due to the government shutdown.)
The timing is awkward. Inflation rose 2.9% year over year in August, the highest since January. Cutting rates while inflation remains hot is more of a poker move than textbook policy. Since rate cuts raise inflation, Powell’s rate cut gamble relies on labor weakness outweighing inflation risk.
Meanwhile, U.S. money-market fund assets hit $7.37 trillion at the beginning of October. That cash is not going to stay parked forever. The fuse is lit, and the question is who will benefit first.
When rates stay high, insurers profit. They invest insurance premium income in bonds and have rolled maturing bonds into higher yields. AIG’s investment income jumped 48% in the second quarter, and Travelers reported a return on equity near 19%. Chubb and MetLife are riding the same wave. With the small rate cut, bond yields remain elevated, and insurers are cashing in.
Banks are not celebrating yet. They remain stuck with hundreds of billions in low-yield securities that tanked when the Fed raised interest rates in 2022–2023. The FDIC says those hidden losses total about $395 billion. Powell gave banks a quarter-point lifeline, but the ocean of losses on their debt is deep. Until bond prices rise much more, banks’ finances will stay under pressure. The regional banks will recover if this trend continues, but not today.
The Fed’s cut may support growth, but cutting rates during hot inflation is like pouring gas on a fire to cool it down. If prices keep climbing, the bond market will stay volatile, and equities will not get a free ride. That keeps the focus on plays that benefit directly from elevated yields or when the pressure on bank finances is relieved over time.
The Fed cut rates despite hotter inflation and weak labor data, potentially igniting movement in $7 trillion of sidelined cash. Insurers benefit first from elevated yields, while banks remain weighed down by bond losses. Timing matters, and capital will not flow evenly across financials. But there are great opportunities for investor upside. Select each ETF below to learn why they will be the winners:
Powell’s rate cut is a volatile gamble and a stress test in disguise. Insurers remain the immediate winners as they reinvest premiums at higher yields. Banks will take longer to benefit. The $7 trillion in cash will move selectively, so patience and diversification define the smart play.
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