Fed Cuts Once—More Political Than Economic
John Lekas – CEO and Senior Portfolio Manager
September 18, 2025
On September 17, 2025, the Federal Reserve enacted its first—and likely only—rate cut of the year. Though the Fed has not indicated such motivation, our view that this move was politically motivated, rather than driven by compelling economic data
Credit spreads remain tight, unemployment levels are stable (which is a key metric the Fed looks at), and Dow Transportation Index remains above its 200-day moving average.
BBG Investment Grade Spread
BBG High Yield Spread
Dow Jones Transportation Index
Based on current market trends, we estimate the 10-Year Treasury yield may approach 5% by year-end*, and the dollar dropping another 6% – 8%. A weaker dollar increases the cost of imported goods and commodities, amplifying inflationary pressures, especially across essential consumer basics.
In summary, we believe interest rates will move higher as a result of a weaker dollar, while unemployment remains flat and equity markets continue to rise. We view the Fed as “one and done.” The primary reason is that, in each of the last three instances when the Fed cut rates, both the 10-year and 30-year yields moved higher. As we’ve noted, the Fed should not be cutting interest rates in an inflationary environment (see our previous article “4-5-6” for more information)
- Stagflation is here to stay, i.e., contained GDP, and higher prices.
- Equity markets move higher
- 10-year and 30-year yields move higher
- Dollar moves lower
The U.S. Dollar Index
*Subject to change
Source: Bloomberg. The views and statements expressed herein are those solely of Leader. This commentary is for informational purposes only and does not constitute investment advice. This document contains preliminary information only, unless otherwise noted, and is subject to change at any time and is not and should not be assumed to be complete or to constitute all the information necessary to adequately make an investment decision. Investing in any mutual fund involves risk, including loss of principal. There is no guarantee the funds will achieve their objectives. Expense ratios are as of the 9/28/2023 Prospectus. An investor should consider the Fund’s objectives, risks, charges, and expenses carefully before investing or sending money. This and other important information can be found in each Fund’s prospectus. For more information, please call please read the prospectus carefully before investing. Current Yield is the weighted average of the annual rate of return based on price. It is calculated by the coupon divided by the price. Average Yield-to-Maturity is the weighted average of the percentage rate of return if the security is held to maturity. Leader Capital Corp. serves as adviser to Leader Short Term High Yield Bond Fund, and Leader High Quality Income Fund, distributed by Vigilant Distributions, Inc., Member FINRA/SIPC. Leader Capital and Vigilant are not affiliated. Past performance does not guarantee future results. The performance data quoted represents past performance and current returns may be lower or higher. Share prices and investment returns fluctuate and investor shares may be worth more or less than the original cost upon redemption. To obtain performance as of the most recent month-end, please call 1-800-269-8810