Fed Hold Extends the Rotation

What Happened

• The Fed held rates and leaned balanced; dots shifted lower for 2026 but Powell avoided promising early cuts.
• The dollar eased as front-end yields slipped; EM FX and commodities rallied, with gold and oil both catching bids.
• Equity breadth improved—industrials, energy, and defense led while mega-cap tech lagged; small caps finally joined the move.

What It Means

• A non-threatening Fed keeps stress contained and allows the rotation into real assets to accelerate without triggering panic.
• Dollar easing relieves FX pressure points and supports commodities, reinforcing the energy/defense leadership trend.
• Broader equity participation shows real money adding risk where cash flow is visible rather than chasing growth narratives.

What I Think

• Powell delivered exactly what rotation needed: relief on policy without a dovish pivot that would reflate tech multiples.
• If data stays cooperative, the dollar can grind lower, letting commodities and value extend gains into year-end.
• I’m staying overweight real assets and underweight long-duration growth until the market forces a different signal.

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Market Terms

• Balanced Dots — A rate-path projection that avoids promising cuts while acknowledging disinflation.
• Breadth — The number of stocks participating in a move; today’s widening breadth is constructive for cyclicals.
• Cash-Flow Leadership — Preference for companies with near-term, dependable earnings in uncertain macro regimes.