Change in Monetary Policy
We are preparing for a shift in monetary policy, with a 25 basis point rate cut looking highly probable this fall. Market pricing, seen in Fed funds futures, now implies over an 80% chance of a cut at the next meeting. This expectation is being driven by the latest jobs report from August 2025, which showed hiring slowing more than anticipated. This economic weakening provides the central bank an opportunity to initiate a cycle of reducing rates, potentially with one or two more cuts to follow. The August 2025 Non-Farm Payrolls report added just 145,000 jobs, below the expected 170,000, while the unemployment rate ticked up to 4.1%. A similar situation occurred in 2019 when the Federal Reserve shifted to cutting rates in response to slower growth, which ultimately supported risk assets through the end of that year. At the same time, we’re seeing a clear revival of risk appetite in the IPO market, which is now the most active it has been since the peak in July 2021. This renewed confidence suggests that underlying market volatility is expected to decrease. The CBOE Volatility Index (VIX) has reflected this, recently decreasing to a yearly low of 13.5.Investment Strategies
Given this backdrop, we should consider positioning for lower interest rates and a more stable market environment. Options strategies that benefit from lower price fluctuations, such as selling puts on major stock indices like the S&P 500, appear attractive. This aligns with the expectation that lower rates will help support stock prices in the coming weeks. Long positions in interest-rate-sensitive derivatives should perform well as the market fully prices in the start of a rate-reduction cycle. This includes buying Treasury note futures, as bond prices will increase when rates fall. We should also consider call options on sectors like technology and real estate investment trusts (REITs), which have historically done well during times of declining rates.VT Markets 라이브 계정을 만들고 지금 바로 거래를 시작하세요.
