Rate Cut Coming? Sectors to Watch

Aug 29, 2025

Kevin Gordon, Director and senior investment strategist at Schwab Center for Financial Research, joins the discussion on the Federal Reserve's independence amid political pressure. He highlights the potential risks of increased control over monetary policy and explores how sectors like housing are reacting to interest rate changes. The conversation dives into the state of bond and stock markets, emphasizing the importance of labor market reports and inflation metrics to anticipate economic shifts. Healthcare investments are also explored as emerging opportunities.

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INSIGHT

Risk To Fed Independence

Political pressure on the Fed risks undermining central bank independence and could increase market volatility.
Markets may demand higher long-term yields if they doubt the Fed's commitment to fighting inflation.

INSIGHT

Steepening Yield Curve Signal

The yield curve is steepening as short-term rates stay low and long-term rates drift higher.
A wider spread signals market uncertainty about future inflation and Fed policy.

ANECDOTE

Real Estate Agent Misunderstanding Fed Impact

Liz Ann Sonders describes explaining monetary mechanics to a real estate agent who expected Fed cuts to directly lower mortgage rates.
She used that moment to remind listeners the 10-year yield more directly drives mortgage rates, not the fed funds rate.

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This week, Liz Ann Sonders and Kathy Jones discuss the implications of political pressure on the Federal Reserve, particularly regarding the administration's attempts to influence monetary policy. They explore the potential risks of increased political control over the Fed, the current state of the bond and stock markets, and the importance of economic indicators such as labor market reports and inflation measures.

Then, Kevin Gordon, director and senior investment strategist, joins Liz Ann to discuss the situation at the Fed, as well as the state of sectors and factors that could be sensitive to changes in interest rates. Kevin points out that housing is not acting as a traditional macro driver, and he explains the lack of correlation between mortgage rates and the fed funds rate.

Finally, Kathy and Liz Ann discuss the data and economic indicators they will be watching in the coming week.

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