As Wall Street digests the Federal Reserve’s latest moves, a new debate is brewing across trading floors and kitchen tables alike: does the market really need another interest rate cut? The question comes after the Fed, for the second consecutive time, trimmed its benchmark rate by a quarter of a percentage point. Yet, even as the ink dried on the central bank’s decision, uncertainty lingered about whether another cut would follow in December—a decision that could ripple through stocks, bonds, and the everyday choices of American savers.
On October 29, 2025, the Federal Reserve announced its second consecutive quarter-point rate cut, a move that some investors had anticipated would inject fresh energy into the markets. But the market’s reaction was muted. According to Axios, the S&P 500 dipped less than 0.5% after Fed Chair Jerome Powell offered a cautious outlook, indicating, “there were strongly different views today. And the takeaway from that is that we haven’t made a decision about December.” The message was clear: the path ahead is anything but certain.
This uncertainty has not gone unnoticed. Three Federal Reserve officials—Dallas Fed President Lorie Logan, Cleveland’s Beth Hammack, and Kansas City’s Jeff Schmid—publicly dissented against the latest rate cut, citing persistent inflation as their chief concern. Speaking at a conference in Dallas on October 31, Logan and Hammack both expressed that they would have preferred to hold rates steady, underscoring the split within the central bank. Schmid, for his part, outlined his reasons for dissent earlier that day, echoing the same inflationary worries.
Yet, for all the hand-wringing about rates, the real story of the current market rally may lie elsewhere. Artificial intelligence (AI) stocks have powered much of the recent gains, with the so-called "Magnificent 7" Big Tech companies showing resilience regardless of what the Fed does. On the day of Powell’s remarks, the Magnificent 7 ETF actually closed up, bucking the trend seen among more cyclical and debt-laden companies that slumped in anticipation of higher borrowing costs. As Sam Zief, global macro strategist for JPMorgan Private Bank, told Axios, "I don't necessarily think that the market needs the Fed to cut, I think the economy would like the Fed to cut." He noted that the market "barely registered" Powell's pushback against a guaranteed December cut.
The relationship between AI and the broader economy is growing increasingly intertwined. According to Axios, AI capital expenditures have grown at a faster clip than consumer spending in the latest GDP data—an eye-popping statistic that highlights just how central technology has become to economic growth. If anything were to threaten the AI trade, the consequences could reverberate far beyond Silicon Valley. As Zief put it, the Fed may not be focused on market concentration, but it certainly cares if a downturn in dominant AI stocks tightens overall financial conditions.
Investors are watching closely to see whether Big Tech firms begin taking on more debt to fund their AI ambitions. Should that happen, lower rates would directly benefit these giants. Until then, their stock prices are likely to move more in response to earnings growth than to interest rate changes. In the meantime, companies tied to the economic cycle and those with significant debt loads are the ones left hoping for more Fed relief.
But the story isn’t just about stocks and the central bank. Down on Main Street, money market funds are enjoying a renaissance. Despite the Fed’s rate cuts, these funds—long prized for their safety and liquidity—are attracting record inflows. As reported by The New York Times, investors have funneled hundreds of billions of dollars into money market funds, even as the interest they pay has begun to slip. According to Peter G. Crane, founder of Crane Data, "I expect about $100 billion to pour into money market funds each month for the rest of the year." He predicts that total assets could reach $8 trillion by year’s end, up from around $7.8 trillion now.
So why the stampede into money market funds? For one, their returns have outpaced investment-grade bond funds over both the past five and ten years. Through September 2025, money market funds (represented by an index of Treasury bills) returned 3% annually over five years, compared to a -0.5% return for the Bloomberg U.S. Aggregate Bond Index. Over ten years, the gap narrows but remains in favor of money markets: 2.1% versus 1.8%. While these funds can’t match the S&P 500’s double-digit returns, they offer a stable, convenient place to park cash—especially when markets are volatile.
Of course, money market funds aren’t without their drawbacks. They lack the Federal Deposit Insurance Corporation (FDIC) protection that banks offer, and their yields are expected to drop by about 0.25% in the coming weeks, following the Fed’s latest move. Still, as long as yields stay above 3%, Crane expects their popularity to hold. "That level seems to be an important level," he noted. Should yields fall further, investors might start to look elsewhere for better returns.
Recent history offers a cautionary tale. After the financial crisis of 2007-08 and during the early days of the Covid pandemic, the Fed slashed rates to near zero, and money market funds followed suit. Many individual investors abandoned them, but corporations stuck around, valuing their liquidity. And while there have been rare instances where funds "broke the buck" and couldn’t pay out every dollar invested, significant losses were avoided.
Looking ahead, the Fed’s own projections suggest its policy rate will not drop below 3.1% for the foreseeable future. But as The New York Times points out, a severe economic crisis could force the central bank to cut more aggressively—a scenario that would again test the resilience of money market funds and the broader financial system. Meanwhile, the Trump administration has been pressuring the Fed to lower rates more sharply, raising questions about the central bank’s independence and the potential for political interference in monetary policy.
For now, the stock market remains buoyant, with companies like Nvidia—hailed as the premier AI infrastructure firm—soaring to new heights. On Wednesday, Nvidia’s market value hit an astonishing $5 trillion, gaining $1 trillion in just four months. In such heady times, having a stash of cash in money market funds can feel comforting, especially when those funds still offer attractive yields.
As the year draws to a close, investors and policymakers alike are left weighing their options. Will another rate cut in December tip the scales for struggling cyclical companies, or will Big Tech’s AI-fueled rally continue to defy gravity? One thing’s for sure: in today’s uncertain environment, everyone—from Wall Street titans to everyday savers—is looking for a safe place to land.
