Is a Fed Misstep Behind the Market Decline?

Investors are uncertain about a potential market recession and the extent of the Fed’s forthcoming rate cuts.

As September lives up to its reputation as a rough month for the stock market, concerns are rising that the Federal Reserve may have waited too long to ease monetary policy.

Ivan Martchev, an investment strategist at Navellier & Associates, remarked that while the Fed has been slow to cut rates, Fed Chair Jerome Powell may avoid blame if he manages to prevent a recession.

However, with weak economic data and a mixed August jobs report, the size of the next rate cut—whether 25 or 50 basis points—remains in question.

The stock market reflected this uncertainty. The S&P 500 tumbled 4.3%, the Dow fell 2.9%, and the Nasdaq dropped 5.8% in their worst week since early 2023. Technology stocks took a major hit, with Nvidia leading the losses.

Meanwhile, the bond market sent a potential recession signal as the yield curve shifted, raising alarm among investors.

Despite this, experts like Chris Graham of Nationwide Financial and Larry Adam of Raymond James believe the Fed still has the tools to avoid a recession by adjusting rates.

As the market eyes upcoming inflation data, investors hope for clearer signals on the Fed’s next move.