The Market Update with EP Wealth Advisors Managing Director, Investments -
Adam Phillips, CFA^®, CAIA, CFP^®

Often quoted in major national media, Adam is a Chartered Financial Analyst (CFA^®), a CERTIFIED FINANCIAL PLANNER™ (CFP^®), and has been included on the Forbes NextGen Best-in-State Wealth Advisors 2019 list. He is a member of the CFA Society of Los Angeles and the CFA Institute. Adam helps establish asset allocation strategy as a member of the EP Wealth Investment Committee, which supports all EP Wealth Advisors and their clients. The Committee’s top-down approach to portfolio construction begins with an outlook on the economy’s likely direction, followed by the implications for different economic sectors and asset classes. This culminates in strategic selection of the individual stocks, bonds, mutual funds or other investments deemed most appropriate for each individual client’s portfolio.

Market Update: Fed Cuts Rates but Signals Uncertainty Ahead 
September 22, 2025 

The Federal Reserve delivered a widely expected rate cut last week, but diverging outlooks among policymakers highlight the uncertainty still facing the economy. 

The Federal Reserve lowered interest rates by 25 basis points last week, as markets had anticipated. Yet the central bank’s updated “dot plot” projections revealed striking divisions about what comes next. 

Some members expect no further cuts in 2025, while others anticipate one or two—and at least one foresees several more. This lack of consensus underscores the Fed’s challenge in balancing a cooling labor market with inflation that remains stuck near 3%. 

Fed Chair Jerome Powell noted the “two-sided risks” ahead: cutting too slowly could allow the labor market to deteriorate, while easing too aggressively risks reigniting inflation. Looking further out, the median forecast suggests just one cut in 2026 and another in 2027, though the trajectory will depend heavily on incoming economic data and the appointment of a new Fed chair next spring. 

For now, both the Fed and investors remain cautious. While lower rates may support economic activity, persistent inflation keeps the outlook uncertain. The path forward will remain data dependent, with policy decisions shaped by how employment and prices evolve in the months ahead.

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Video Summary: 

Hi everyone. I'm coming to you from Boston this week. It's a different location for me, but I thought it was important to check in now that we had last week's FOMC meeting. As expected, we saw the Federal Reserve cut rates by 25 basis points last week, so no surprise there. But what I thought was interesting, as usual, really comes from the comments. 

Following the FOMC meeting in the press conference hosted by Fed Chairman Jay Powell, as well as I mentioned last week, this was one of those meetings that occur four times a year where the Fed updates its dot plot and summary of economic projections. And I thought what was interesting there, if we just start with the dot plot. 

What you're looking at here is what we refer to as this dot plot, and all of this is four times a year, the 19 members of the FOMC. So you have the 12 Fed presidents and the seven Fed governors. They are asked to provide their expectations or projections of where they expect the Fed funds rate or the short-term policy rate that they set to end in the current year. 

So the end of 2025, the end of 2026, 27, and then the longer-term expectation. I don't think anyone's really looking at that as a reliable indicator. I think it's really more important to look at this for what the Fed has in mind, and this is all anonymous, but I think it's interesting just because it shows where those who are in charge of setting interest rate policy expect policy rates to go in the future. 

And so obviously things can change. But one of the big takeaways last week is that this is a federal reserve that seems as lost as a lot of us are. This is not a federal reserve with a lot of convictions. So this dot plot that you're looking at shows a series of yellow dots. And it's listed in order of year. 

You see a lot of dispersion. If we just look at 2025 starting there, what you see is those, there are six dots, actually seven dots at the top. First, there's one dot, and then below that you see a row of six dots. So what that's saying is that six members of the FOMC expect no further rate cuts in 2025. 

They expect policy rates to remain where they are through the end of the year. One person actually expects rates to move higher between now and the end of the year, and then the remaining members expect two or three cuts or in one case, you see an outlier there at the bottom, there is one individual. 

He is Steven Myron, who is on loan to us from the White House. He's the, the newest Fed governor that was nominated by President Trump. He actually expects numerous cuts between now and the end of the year. What I take away from this is that this is a fed that lacks conviction. 

They are really having a hard time in this current environment. We know that the labor market is softening. But we also know that inflation is not defeated yet. And so I think that you know that this is an area where we expect things to be a little bit choppy here. 

We're waiting for more data. It appears the Fed is as well. Jay Powell has a press conference, talking about the fact that we are facing two-sided risks right now. One risk being that the Fed doesn't cut rates as they did last week, and the labor market actually gets a little bit worse, and they fall behind the curve. 

The other risk is obviously the other side of their mandate. We talked about their dual mandate last week, and so in, in with this risk, it is simply that. They ease policy too much, and then we see a, uh, inflation reignite and we see, [00:04:00] uh, inflation actually move higher. We know that it stalled out around 3%. 

The risk is that the Fed loosens policy too much and we see inflation actually start to grind higher. So the Fed is not in an easy job right here. Uh, you, if, if you look out, uh, going back to that dot plot, you look out to 20 26, 20 27, the median expectation, and you can look at that, uh, by using the green line there. 

Uh, the median expectation is for one cut next year, one cut the following year. Anything can change. We know we are still waiting for, uh, the, uh, the new Fed chair to be nominated by President Trump because we know that JJ Powell's term ends in May of next year. So I think this is going to be a really interesting environment for now. 

We're going to take the data as we get it, just like the Fed will. And, uh, and you know what, as, as we've been saying, I think it's really easy to get caught up in the idea that now that rates are coming down, view that as a sort of relief for the economy and potential catalyst for the stock market. But that being said, we are also mindful that inflation remains a problem. 

And so we're not going to get too ahead of ourselves. We may see additional rate cuts. In the coming months, we're also going to be watching that inflation data. And so this is certainly an environment where we're going to remain data dependent, as is the Fed. So I will leave it there for right now. I'll look forward to catching up with everyone next week. 

But as always, if you have any questions, please feel free to reach out to your advisor. Have a great week.