Trading Desk Note — 2025-09-17: Remained in Cash After Fed

Date: 2025-09-17

Quick Take

We stayed in cash after today’s Fed decision. The move reflects a preference for clarity over conjecture — policy language was mixed and market reaction choppy, so we chose to wait for clearer signals before redeploying capital.

Rationale

• Fed message was balanced: Chair Powell emphasized ongoing data-dependence, and while the dot plot nudged toward a slower pace of hikes, the committee left options open. Source: Federal Reserve press release.
• Market reaction lacked conviction: rates initially dropped then retraced; equities moved in a narrow range. Elevated intraday volatility increases the risk of whipsaw trades.
• Macro indicators mixed: recent CPI and PPI prints show stickier services inflation even as goods disinflation continues. That profile supports caution until labor and services trends clarify.

Watchlist

• 2s–10s curve dynamics — watch for persistent steepening or renewed inversion.
• Nonfarm payrolls and average hourly earnings (next release) — a surprise here will change the calculus.
• Bank earnings and stress indicators — credit tightening would favor longer cash.
• Key equities: large-cap defensives and rate-sensitive sectors (REITs, utilities) for tactical entries if yields stabilize lower.

Next Actions

• Maintain cash through end of week; reassess after employment data and market reaction.
• If yields convincingly break lower with falling vol, start phased deployment into defensive income trades and select cyclicals showing momentum.
• Set alerts: 10-year yield below 3.80% on 10-minute close; VIX under 16 with confirmed equity breadth improvement.

Questions or trade ideas? Ping the desk.

Sources: Federal Reserve press release, market data and macro releases (09/17/2025).