Could a Fed Rate Cut Spark a “Sell the News” Reaction in 2025?

Highlights
• JPMorgan warns the Federal Reserve’s expected September 17, 2025, rate cut may already be priced in, setting up a possible “sell the news” reaction.
• Equities remain stretched after a strong rally, with buyback demand and retail participation showing signs of weakness.
• Market response will depend on incoming U.S. data, Fed communication, and whether the cut is seen as pre-emptive or reactive.

Fed Rate Cut September 2025 Expectations
Investor optimism is building ahead of the Federal Reserve’s September 16–17 meeting, where a 25-basis-point rate cut is widely expected. Yet JPMorgan strategists caution that the move may not generate fresh upside, as markets have already priced in easing. Instead, a policy shift could trigger profit-taking, reminding investors that rate cuts tied to growth concerns do not always translate into stronger equity performance.

JPMorgan Flags Risks of a Sell the News Reaction
JPMorgan’s trading desk highlighted several vulnerabilities that could magnify a pullback once the cut is announced. A prolonged rally in risk assets has left equities richly valued, while corporate buyback activity—once a reliable source of market support—may be slowing. At the same time, retail participation is showing signs of fatigue, reducing the breadth of market strength. These dynamics raise the possibility that investors will lock in gains rather than extend risk exposure after the Fed’s move.

Market Positioning Stretches Valuations
Positioning data indicate concentrated exposures in momentum-driven technology names and U.S. equities broadly, creating an environment where even modest disappointments can trigger outsized reactions. Historically, when the Fed eases policy in response to softer growth rather than clear disinflation, equity markets often struggle to sustain rallies. For institutional investors, the concern is less about the cut itself and more about whether the narrative surrounding it signals underlying weakness.

Economic Data and Policy Signals in Focus
Upcoming payrolls and inflation readings will play a crucial role in shaping expectations ahead of the meeting. If the data suggest persistent inflation pressures, markets may question how aggressively the Fed can continue cutting. Conversely, if economic softness becomes clearer, a rate cut could be interpreted as reactive rather than pre-emptive, dampening risk appetite. Fed communication between now and September 17 will therefore be critical in steering market sentiment.

Cross-Asset Implications Remain Balanced
Should a “sell the news” outcome materialize, equity breadth may narrow further, with defensive sectors outperforming cyclicals. Fixed-income markets could see yields adjust depending on whether the cut is perceived as growth-supportive or growth-reflective. Meanwhile, the U.S. dollar may fluctuate as global investors recalibrate risk perceptions. JPMorgan also pointed to reduced buyback liquidity as a hidden factor that could pressure equities if sentiment shifts.

Looking Ahead: Market Narrative Matters Most
The true test for investors lies not in the Fed’s policy decision, but in whether the cut reshapes the broader narrative around U.S. economic momentum and inflation persistence. If the move is seen as insurance against uncertainty, markets may stabilize. If instead it is interpreted as confirmation of weakening fundamentals, the “sell the news” warning could play out. Investors across the U.S. and Israel will be watching both the data and Fed language closely in the days surrounding the September meeting.