Weekly Market Commentary: Risk Appetite Boosted by Fed Cut

Sunflower Bank Weekly Market Commentary: September 22, 2025

Each week, our Wealth Management team analyzes the U.S. stock market and bond market activity and news of the previous week, summarizing their findings into a weekly market update report. The key points of this week's commentary, "Risk Appetite Boosted by Fed Cut," include:

• Equity markets rose on the week as risk assets were boosted by the Federal Open Market Committee’s decision to reduce the benchmark lending rate 25 basis points to a range of 4.00-4.25%. The S&P 500 rose 1.2% and each of the Nasdaq 100 and Russell 2000 gained 2.2%.
• Interestingly, most government bond yields rose following the decision. The 2-year yield rose 8 basis points, the 10-year yield rose 10 basis points, and the 30-year yield rose 11 basis points in the days after the decision. The increase in longer-term interest rates likely reflects the combination of expectations for stronger economic growth and the potential for higher inflation. As a reminder, the FOMC exerts the most control over shorter-term interest rates while longer-term rates are determined by the market.
• Although the Committee believes that the balance of risks favors less restrictive policy, Chairman Powell emphasized that inflation remains above trend and that there is potential for the rate of inflation to increase. The Committee continues to believe that tariffs will results in a one-time shift in the price level, as opposed to a sustained increase in the rate of change of prices.

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