While the economy isn’t the stock market, anything that helps reduce borrowing costs for the U.S. consumer should help boost the economic backdrop.
But what if there’s too much optimism being priced into stocks on expectations for a second Federal Reserve interest-rate cut at the end of October?
“The jobs market has clearly slowed, and the impact and trajectory of inflation and tariffs remain uncertain,” wrote Brandywine Global’s equity team, led by Patrick Kaser and Celia Hoopes, in a Monday outlook.
“And while lower rates would be a benefit to small businesses, less than 20% of household debt and 35% of business debt is exposed to short-term rates, according to analysis done by Empirical Research Partners of first-quarter 2025 data.”
The S&P 500’s consumer-discretionary sector was up 0.9% on Monday, versus a roughly 0.5% gain for the broader index, according to FactSet.
