The Doves have spoken, and the Dots of the Future are plotted. If it sounds like an ancient oracular process, you would be correct. At the most ancient Hellenic oracle of Dodona, priests interpreted divine will through the cooing of doves nesting in the sacred oak tree. Homer described being able to hear Zeus’s will at Dodona. And with all the dubious statistics the Federal Reserve relies upon whilst trying to divine the direction of the economy, they might as well resort to such measures when filling out their dot plots.
But our modern-day doves have spoken, and the Federal Reserve Board were unanimous in their cooing as they attempted to interpret the future. They were 11-to-1 in favor of lowering the overnight lending rate by 0.25%, which put the overnight funds rate at 4.00% to 4.25%1. They largely blamed a weakening labor market as the reason for the cut. But 11-to-1? That’s not unanimous, right? Well, the only one who disagreed did not do so for hawkish reasons but instead wanted a half-point cut. Looking forward, 10 of 19 Fed governors wanted two more cuts by the end of 2025; the other 9 wanted one more cut this year. Where the betting odds at the CME Group disagreed with the reality on the board was in 2026, where the Fed’s dot plot only forecasted one cut. “The market” saw two or three in 2026 according to our review of the futures, so there could be some unwinding of fixed income bets which could create some near-term volatility in the space. Other than that, the cooing of the doves seemed to put the market to sleep as Powell’s voice tends to do to everyone attempting to pay attention to write market reports. While the Dow Jones was up a respectable 260 points on Wednesday, the S&P 500 was down a lackadaisical 0.1% with its pal the Nasdaq lollygagging behind down 0.33%. The translation is much of this move was SO anticipated it was much ado about nothing. That’s pretty anti-climactic. It renders too much analysis of the Fed’s moves as seemingly unwarranted as the moves of the bond and stock market seemed to shrug and smirk like a comfortably numb tourist who has been there and seen that and simply wanders off to the next point of interest. Which is …
“Help with mortgage”. That’s the Google search term that has taken off once again. The number of searches for “Help with mortgage” now equals 2008 levels.2 Although interest rates are really at their historical norms, the combination of average house payments being double 2020 levels and the cumulative effect of other inflation may have taken its toll on many households. YouTube Shorts are awash with struggling families not having enough to get by. Emoting into your phone from the passenger seat of your car and broadcasting it to the world is apparently the highest form of therapy for many Gen Zer’s and Millennials. And I tell you, you click on one, and it’s all you see … Perhaps the Fed finally lowering rates will allow some of the struggling families to refinance into a better situation. Unfortunately, mortgage companies like their profit margins. After all, why cannibalize each other if you’ve got loans on the books at 7 and 8%? When it comes to refinancing applications, as interest rates fall, underwriting standards tighten up. The reason for this is that the dropping rates lead to a surge in applications which can overwhelm lenders and cause them to be more cautious and selective. They are concerned with “cash-out” refinancing, which increases their risks, so they tighten up on credit scores, debt-to-income ratios and loan-to-value ratios. In other words, do be vigilant if you have a mortgage at a higher interest rate, but don’t be surprised if the mortgage rates you are seeing don’t decline 1-to-1 with falling interest rates.
The good news is that inflation, while recent readings have been hotter, is not being used as a scapegoat by companies. According to FactSet, the number of companies referencing “inflation” on earnings calls from Q2 versus Q1 fell3. 8 of 11 S&P 500 sectors experienced a quarter-over-quarter decline in references to inflation. This is perhaps an early sign of some easing there and another reason our oracular doves are cooing so loudly.
CNBC’s Sara Eisen, who offers remarkably balanced reporting compared to many in the media, amassed and tweeted the comments of several financial services companies in the payments and loan arena including those from Ally Financial, American Express and Capital One Financial4. Those companies alluded to things like consumers are doing “better than you think” from reading the papers (or perhaps from watching weepy YouTubers). Delinquencies are trending in a better direction and that the consumer is actually in a strong position, despite what newspapers suggest. Two of the three aforementioned companies expressed the same sentiment into the mischaracterization of the consumer in the media. This is why it’s important to look at actual commentary from companies. You give the media an inch, they’ll manufacture a mile. So things are … not so bad.
In our Investment Committee we’re examining new ways to grow your wealth for the long term and look forward to reporting on those in the months ahead. For now, please know that our discussions are reaching an altitude of a 30,000-foot look at our current offerings to find ways to improve them. For what it’s worth, we feel we’re in a really good position with our current offerings, but nothing is ever perfect. If you’ve followed us for some length of time, you’ll know one of our Core Values in Continuous Improvement. We’re not going to stop doing that here as we look at various ways to grow your wealth. If you want to explore those with us, then give us call. With each and every conversation we have, we crystallize your financial plan and that should lead to improvements in outcomes. We’ll always listen to you, our bosses, and strive to do what’s best for you and your family, and if you listen to us, we’ll change your financial world …
Sincerely,
Scott Wright
Portfolio Manager
The Wealth Training Academy
Sources:
1https://www.cnbc.com/2025/09/17/fed-rate-decision-september-2025.html
2@InverseCramer
3@FactSet
4@SaraEisen
