Traders Price In Five Fed Rate Cuts For 2025 As Market Plunges Into Bear Territory

The severity of Wall Street’s bloodbath has turned investors frantic, but will the Fed freak? Market chaos triggered by President Trump’s sweeping new tariff policy has sent stocks plummeting into bear territory, with the S&P 500 down ~10.5% in just three days. This historic selloff has shifted interest rate expectations, with traders now pricing in five quarter-point cuts by the Federal Reserve before the year’s end — up from just three cuts anticipated last week.

• Markets indicated a 40% likelihood of an emergency 25-basis-point rate cut before the Fed’s next meeting on May 7 — a measure not employed since the 2020 COVID market crash.
• JPMorganJPM
  CEO Jamie Dimon warned in his annual letter that these tariffs will “likely boost prices on both domestic and imported goods” while undoubtedly slowing economic growth.

The new normal: State Street’s Tim Graf described the selloff as a “named event” that future market historians will analyze for decades. Additionally, previously stable bonds continue struggling with the iShares 20+ Year Treasury ETFTLT

, extending its 45% five-year decline as uncertainty pervades fixed-income markets. For investors seeking refuge, short-term bond ETFs like Vanguard Short-Term Treasury ETFVGSH

and SPDR Bloomberg 1-3 Month T-Bill ETFBIL

could offer attractive upside, with current yields of 4.27% and 4.04%, respectively. Fed Chair Jerome Powell acknowledged the complexity of the situation, warning that, “You have inflation that’s going to be moving up, and growth is going to be slowing. It’s not clear at this time what the appropriate path of monetary policy will be.”