The Fed lowered interest rates just as expected.  Short-term rates went down but long-term rates didn’t respond. As I wrote two weeks ago, a Fed rate cut doesn’t mean lower mortgage rates. The market anticipates several more rate cuts by year’s end. I disagree.

Why cut rates?  New job hiring is slow and the president wants cuts. But the economy is growing at 3% and inflation is well above the Fed’s target, suggesting no rate cuts are needed. I’m glad I’m not running the Fed!

I just finished the book, How Countries Go Broke by Ray Dalio. He is convinced that the U.S. is on a path to a debt crisis. Losing Fed independence is one of the events that historically happens before such a crisis begins. Just look at Turkey for an extreme example. President Erdogan printed money even as inflation was rising. That juiced the economy, pushed their stock market higher, and he was re-elected. Since then, their inflation rate reached 85%. That’s not a typo. Fed independence is in the hands of our Supreme Court.

I feel sorry for those that trade solar and green energy stocks based on headlines. President Trump prefers fossil fuels but the Invesco Solar ETF (TAN) rose 550% during his first term. Under the friendly Biden administration TAN plunged 70%. With Trump back in office TAN has jumped 65% since April! Go figure.

Meanwhile the overall market is near its high even with the craziness in Washington. That is easier to explain. I’ve already written about how the tax bill is stock market friendly. But a bigger issue is that over the last decade Corporate America has done an exceptional job of adapting to whatever is thrown at them. Earnings are good.

Technology stocks are the leaders this year. That is beginning to sound like a broken record. If you remove AI stocks from the indexes then gains are modest. An ETF of the S&P 500 companies that pay and raise dividends each year (ProShares S&P 500 Aristocrats) is up three percent in 2025 and an ETF that holds the least volatile S&P 500 stocks (Invesco S&P 500 Low Volatility) is up 4 percent. Still, that’s better than sitting on the sideline. 

Serious people consider probabilities, not possibilities. And in most cases what is probable is in the interests of most people. Allow for more volatility, of course, but the positives will carry the day.  Stand by. 

David Vomund is an Incline Village-based Independent Investment Advisor.  Information is found at http://www.VomundInvestments.com or by calling 775-832-8555.  Clients hold the positions mentioned in this article.  Past performance does not guarantee future results.  Consult your financial advisor before purchasing any security.