The Impact of Rate Cuts on the American Consumer and Stock Market

And now let's get to the big story breakdown.

In midweek trade, Wall Street is flat after hitting pause after the Jackson Hole rally last Friday.

Trump threatening higher tariffs as well as export restrictions on countries that tax or regulate US tech firms, a move that could spark new tensions with the.

And in India doubled overnight to 50% with Trump frustrated over the country's purchase of Russian oil.

Meanwhile, a Chinese trade negotiator is expected in DC this week.

Well, joining me as we head into the final months of 2025 is Dale's mother is founder and CEO of RDSL.

Dale, great to have you on the show.

Thank you so much for joining me.

Yeah, good to be here, Remy.

Joining me ahead of Nvidia earnings today and of course there has been a pause in terms of equities, but we saw that rally on Friday.

What does all of this mean for the markets?

Yeah, you hit it right on the head whenever you talked about Nvidia's earnings call perhaps being more like an economic indicator release as opposed to an actual earnings release, 8% of the S&P 500 being made up of this one particular company.

It has the chance to move the market in one way or the other.

I don't necessarily think that a good earnings call and maybe even future guidance from the CEO is going to give us what we need to take the next leg up, but I definitely believe that it could spar us to the next leg lower if we see less than stellar earnings from Nvidia.

Yeah, and when we take a step back and look at the major US stock averages year to date, we are seeing gains, but as we head into year end, there are a lot of calls price targets for the S&P 500.

So where do you stand right now?

Yeah, I still think the S&P 500 has a very good chance to hit our target, which is 6550 by the end of the year.

The 6550 is achievable, but I do think that we're entering into what we call financial winter here, Remy, and we talk about this a lot with our clients because most of our clients, they have worked hard.

Hard to get to where they are and they can't afford these significant pullbacks.

So prepping for what we call financial winter emotionally is a good thing for them, knowing that the September, October months, even starting in August, so we would say August, September and October typically are the months where we see a little bit of pullback, a 10% reset perhaps may be possible.

Now with that being said, you said the S&P 500 has some gains, and it certainly does.

A lot of those gains are led by AI trade and the AI spend.

If you look at something like an equal weighted index compared to the overall S&P 500, it's easy to see that the S&P 500 is made up predominantly of the S&P 10 and the S&P 490, not done nearly as much.

Yeah, and I'm glad you brought that up because when we traditionally head into the month of September after Labor Day, we do see what you're referring to as financial winner.

But given where we stand in terms of rates, what are your expectations and what does this mean not just heading into your end but also 26?

Yeah, this is the paradox that we enter into really because you've got the financial winter statistics 56% of the time historically S&P 500 is negative in the month of September.

But you've got a rate cut that's coming, and I would love to see a 50 50% cut.

That would be incredible.

But that rate cut is coming because of a weaker labor market, and that weaker labor market is also coupled with the potential for a rising inflation number.

And so we're going to keep a close eye on the CPI.

The Fed has proved that it is data dependent and because of that we have to see what the CPI number comes out before they meet in September to really know if that rate cut is actually going to take place.

And if they come out and say no rate cut.

I think the market's going to react very negatively to that.

So prepping for that, we have strategies around that to be able to make sure we've got some positions that, you know, whether the broadening out of the market takes place or maybe just an overall drop in the market, making sure that this financial winner is prepared for is the number one factor.

You also mentioned earnings.

They've been very, very strong, but in August we saw a sell off even in spite of those strong earnings in tech and AI.

I think that the overvaluation is something that investors are starting to wake up to.

And it may it may again continue this pause into September in the overall equity market.

Yeah, and when we're talking about economic data here ahead of that September 17th great decision for the Federal Reserve, we will be getting key inflation figures and even at the end of this week we will be getting PCE figures on Friday morning.

So before we head off for the holiday weekend, we'll be digesting those data points.

But of course the jobs report next Friday.

So what are your expectations?

Yeah, my expectations are that we're going to continue to see a little bit of a weakening in that jobs report.

Of course that was all the rave.

The news was about jobs and how the error, one of the worst errors we've seen in half a century took place, and the mix up there probably has not helped with the accuracy of that data, but still nonetheless, I say that we're going to see a little bit slowing in the jobs.

But when I'm keeping an eye on with that, especially whenever we consider the tech impact on the overall market, I like to look at the the productivity of the American worker because that is on the rise.

So even the workers that are working may be fewer than they were a year ago, but that that worker is more productive than ever before, and that's a good thing for the American economy.

If you're invested in the US economy long term, you're going to be completely OK.

The equity market is the place to put money to work, and this rate cut is going to make it even more enticing to put money to work in the equity market because the fixed income market and the savings accounts, they're just not going to do nearly as good.

Yeah, and I'm glad that you brought that up because for many Americans out there who are watching right now, they're thinking, OK, so if the rate cuts do happen as expected heading into your end, what does this mean for the American consumer because that does make up GDP and hence growth.

So what does it mean for mortgage rates as well as borrowing costs?

Yeah, mortgage rates should be affected to the positive.

For the buyers at the same time, mortgage rates are not controlled as much by the short term.

You know this, the short term, the short end of that curve is not what controls mortgage rates.

It's that long and it's that 10 year that actually needs to move, and that 10 year movement may not actually come to fruition immediately, not to get into the weeds on how tenure is priced in, but theoretically that tenure is an open market.

Whether or not the the investor in those Treasury notes has confidence in the American consumer and the American government, that plays a big role in that.

So we should see mortgage rates lower a little bit.

That's going to help a ton, borrowing things like for cars, for instance, for an automobile, that's going to be much cheaper on a consumer, and consumers will have the ability to go out and purchase things again.

But it could very easily lead to inflation.

Basics of economics.

There will be more dollars chasing fewer goods and we could see prices start to rise.

So the Fed's in a tricky place here.

They're really in a tricky place.

I'm I'm an advocate for the Fed rate cut.

But at the end of the day it could very easily create this split between the American that has their investments in the stock market and the American that works day to day 40 hours a week, blue collar, that split could be even further divided if we're not careful.

Yes, Dale, I appreciate your time today.

Thank you so much for breaking it down for us.