Fed Rate Cut Sets Stage for Year-End Rally to 7,500

10/29/2025

Fuel for a Year-End Rally: The Fed’s Latest Rate Cut Could Push the S&P 500 Toward 7,500

Market Summary

The Federal Reserve cut its benchmark rate by another 25 basis points today, bringing the federal funds target to 3.75 % – 4.00 % and officially ending quantitative tightening effective December 1st. Chair Jerome Powell cited “clear signs of weakening employment data” and slowing wage growth as reasons for easing policy, noting that the labor market “has cooled without triggering broad layoffs.”

The decision to stop shrinking the Fed’s $6.6 trillion balance sheet marks a full policy pivot toward liquidity support. Lower borrowing costs and restored liquidity are historically the two most powerful catalysts for equity markets, and both are now in play as the year closes.

Strategic Context

Powell’s comments on employment come at a time when many corporations are turning to AI-driven efficiency to sustain profitability. Companies across sectors are trimming headcount yet boosting output as automation and machine learning reduce costs and expand margins. This dynamic explains why earnings have remained resilient despite weaker hiring data. As capital costs decline, firms that have already integrated AI into their workflows are positioned to see margin expansion accelerate. The combination of lower rates, stable earnings, and rising productivity is now driving a broad re-rating of U.S. equities.

Five-Week Outlook and Sector Leadership

The S&P 500 now has a clear path to 7,500 by year-end, supported by easier monetary policy, renewed liquidity, and stronger corporate profitability.

The sectors most likely to benefit include:

• Technology and AI infrastructure – beneficiaries of lower discount rates and continued demand for cloud, chips, and data automation.

  
  

• Consumer Discretionary – improved sentiment and lower credit costs support spending heading into the holidays.

  
  

• Real Estate and REITs – rate cuts ease refinancing pressures and improve valuation models after two years of headwinds.

  
  

• Financials – wider net-interest margins on a steeper yield curve combined with stronger loan demand.

  
  

• Industrials and Energy Transition – as capital investment resumes and project financing costs fall.

  
  

With inflation moderating and liquidity expanding, market momentum is shifting decisively positive. While near-term volatility is possible, the balance of factors now favors continued upside into early 2026. For investors, this is the time to review allocations, add exposure to sectors positioned for rate-sensitive recovery, and align portfolios with the next leg of the expansion.

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Note: This information is for educational purposes and should not be considered financial advice. BFG Wealth Management and/or its clients may hold positions in companies mentioned at the time of this article. Consult with a financial advisor for personalized guidance.

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