Summary:
As the Fed signals a rate hold, investors ask: Will steady policy spark fresh buying and set markets on course for a new bull run in August?
With the US Federal Reserve widely expected to hold rates steady after its July meeting, traders and investors are weighing a pivotal question: Could this pause in policy be the spark that reignites a lasting bull run across global markets? The backdrop is ripe with tension and opportunity—Wall Street has just ended a run of record highs, futures are flat, and every word from Chair Jerome Powell is under the microscope. Let's unpack the Fed pause “effect,” potential market scenarios, and what could set stocks—and other assets—moving in August.
For months, the Fed has kept its benchmark rate firmly at 5.25–5.50%, citing stubborn inflation alongside a surprisingly resilient jobs market. As of today, virtually all analysts expect the Fed to maintain rates in this band, making it the sixth consecutive meeting without a change. While inflation has moderated—core CPI eased to 2.9% year-on-year in June from a peak of 4.5% last year—the jobs market remains strong, with unemployment steady at 4.1% and jobless claims recently touching a three-month low at 217,000.
The real intrigue lies not in today's decision, but in the Fed's tone and hints for September. Powell's press conference will be key for gauging the central bank's appetite for future cuts.
A Fed pause gives breathing room to stocks, bonds, and real assets, often signalling that rates have peaked and that easier monetary conditions may be on the way. But whether this turn sets off a new bull run depends on how investors interpret the Fed's forward guidance and incoming data.
The S&P 500 just snapped a six-session record streak, closing slightly lower at 6,305 on Tuesday.
The Nasdaq slipped 0.2%, while the Dow Jones retreated 0.3%.
The dollar index bounced to 99.1 as traders trimmed USD risk, but bond yields stayed relatively steady, with the US 10-year Treasury at 4.23%.
Gold hovered near $2,420/oz, showing resilience as investors digest Fed headlines.
The Fed's decision and Powell's guidance ripple through various markets:
US and global equities: Bull runs often get fuelled by policy pauses—lower rates make riskier assets more attractive and cut borrowing costs.
Bonds (yields and credit): A pause can prompt bond rallies as investors bet on eventual cuts.
US dollar: Tends to weaken if the Fed signals easier policy, supporting stocks, gold, and commodities.
Gold/cryptos: Both gain if real yields fall or if the dollar softens after the Fed stands pat.
Commodities and emerging markets: These assets benefit from faster flows and weaker dollar conditions that follow dovish central bank signals.
The Bull Case:
Soft landing optimism: If Powell confirms the Fed is on track for rate cuts later this year, stocks could rally, and risky assets like growth tech and EM equities may surge.
Tech earnings tailwind: Blockbuster results from Meta, Microsoft, Amazon, and Apple could revive the “Magnificent Seven” momentum, further fuelling the rally.
Improved liquidity: Central bank pauses often refresh liquidity, giving sidelined cash reason to re-enter stocks and bonds.
The Bear Case:
Persistent inflation: If the Fed signals concern about stubborn price pressures, markets may price in a “higher for longer” regime, throttling bullish bets.
Geopolitical or trade headwinds: US-EU trade tensions, China slowdown (as seen with Caixin PMI slipping to 49.8 in July), or shock inflation in emerging markets like Brazil (+5.3% y/y) could curb risk appetite.
Profit-taking: After a strong tech-led run, the first signs of disappointment or hawkish Fed language could prompt sharp corrections and rebalancing.
| SCENARIO | LIKELY MARKET REACTION |
| Dovish Pause & Sept Cut Hints | Equities, gold, and EM rally; USD softens; bonds rally |
| Hawkish Pause | Stocks stall or correct; yields and dollar firm; gold weakens |
| Neutral/Wait-and-see Stance | Markets tread water; volatility is low until the next jobs/inflation data |
Keep watch on Friday's (1 August 2025) nonfarm payrolls report and next week's global PMI/inflation data, as these will quickly shape expectations for the September Fed meeting.
Futures, options, and index funds have seen a mix of hedging and cautious long bets ahead of the Fed. Options pricing on the S&P 500 implies moderate-to-elevated volatility for the remainder of the week, especially with earnings and jobs data overlapping Fed guidance.
If the rally does resume, analysts see room for the S&P 500 to climb towards 6,400–6,500 in the coming weeks, so long as macro data doesn't disappoint and the Fed tone stays supportive.
The Fed's decision to hold rates is more than a non-event—it is a message. If Powell manages to reaffirm the path toward easier policy, while keeping inflation nerves in check, fresh highs could be ahead for global markets. If caution and ambiguity prevail, investors may opt to stay on the sidelines, awaiting a clearer green light. The next week will tell whether markets view this pause as a springboard or merely a brief plateau.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment, or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction, or investment strategy is suitable for any specific person.
ADP reports private sector hiring unexpectedly contracted in June – the first drop since March 2023 – suggesting the economy may be less sturdy.
2025-07-30
NVO.US stock price fell 23% after Novo Nordisk cut full-year guidance and named a new CEO amid weaker Wegovy and Ozempic U.S. sales forecasts.
2025-07-30
Gold moved sideways as Trump's confirmation of a US-China tariff pause extension is still pending after trade talks between top officials in Stockholm.
2025-07-30
