Strategic Watch: Cautious Wait-and-See Before Fed Decision – Finance & Markets – Global – Week of 08/09/2025 to 14/09/2025
Weekly Trends
Global markets navigated this week in an environment of calculated wait-and-see, marked by the convergence of contradictory macroeconomic signals and the imminent approach of the Federal Reserve meeting on September 16-17. The S&P 500 index posted a modest performance, closing at 6,554.41 points on September 12, representing a marginal gain of 0.06% for the session. This apparent stability nonetheless masks significant sectoral movements and underlying volatility measured by a VIX at 14.76 points, reflecting a market in strategic watch mode.
News
1. The Fed Prepares for Its First 2025 Easing
The Federal Reserve is set to initiate its first monetary easing cycle of the year during its September 16-17, 2025 meeting. After maintaining rates in the 4.25%-4.50% range for five consecutive meetings since December 2024, the Fed faces growing pressure to support a labor market showing signs of weakening.
Analysis — This decision comes at a time when the Fed must balance its dual mandate of price stability and full employment. Jerome Powell has signaled the institution’s readiness to act proactively against growing labor market risks while remaining vigilant on inflation, which remains above the 2% target.
In Brief — 93% probability for a 25 basis point cut, marking a turning point in U.S. monetary policy.
2. Oracle Revolutionizes Its Valuation with AI
Oracle Corporation delivered exceptional results that propelled its stock by +36% in a single session, marking its best performance since 1992. The company announced Remaining Performance Obligations¹ (RPO) of $455 billion, representing phenomenal growth of 359% year-over-year.
Analysis — Oracle is fully benefiting from the AI¹ revolution by offering a competitive alternative to traditional hyperscalers. This transformation positions Oracle on a convergence path with cloud sector leaders.
In Brief — Oracle’s transformation from traditional software publisher to AI hyperscaler, valuing the company near $1 trillion.
3. ECB Maintains Status Quo in Complex Environment
The European Central Bank decided on September 11 to maintain its three key rates unchanged: deposit rate at 2.00%, refinancing rate at 2.15%, and marginal facility at 2.40%. Christine Lagarde emphasized that eurozone inflation at 2.1% in August remains close to the 2% target.
Analysis — The ECB¹ adopts a cautious approach facing geopolitical and commercial uncertainties. The central bank favors a data-dependent approach, keeping its options open for future meetings.
In Brief — ECB strategic pause in its easing cycle, prioritizing evaluation of future economic data.
4. U.S. Bond Yields Reflect Rate Cut Expectations
The U.S. 10-year Treasury yield evolved at 4.06% on September 12, after touching a five-month low of 4.00% earlier in the week. This 18 basis point¹ decline over the month reflects the market’s integration of Fed rate cut expectations.
Analysis — The U.S. yield curve anticipates a gradual easing cycle, with a 50 basis point spread between 10-year and 2-year bonds. This configuration suggests investors believe the Fed will successfully adjust its policy without triggering a major recession.
In Brief — Bonds already pricing in multiple rate cuts, reflecting consensus on coming easing.
5. Gold Reaches New Historical Peaks
Gold prices established new historical records, surpassing $3,650 per ounce, supported by interest rate cut expectations and growing geopolitical uncertainties. UBS raised its price target to $3,800 by end-2025.
Analysis — Gold benefits from the convergence of several favorable factors: prospects of negative real rates, persistent geopolitical tensions, and central bank reserve diversification.
In Brief — Gold confirms its safe-haven status in an environment of falling rates and growing uncertainties.
6. VIX Remains Contained Despite Uncertainties
The VIX¹ volatility index maintained a moderate range around 14.76 points, reflecting a relatively serene market despite approaching important monetary decisions.
Analysis — This low volatility reflects a market confident in central banks’ ability to manage the economic transition. However, it could also mask latent risks.
In Brief — Contained volatility reflecting market confidence, but vigilance required on upcoming catalysts.
7. Currencies Adjust Positions Before Central Banks
The euro stabilized against the dollar around 1.1736 USD, moving in a restricted range while awaiting Fed and ECB decisions. The British pound showed relative resilience, supported by expectations of a more cautious Bank of England approach.
Analysis — Currency markets anticipate growing divergence between major central banks’ monetary policies. The euro could benefit from a weaker dollar if the Fed engages in a more aggressive cutting cycle than expected.
In Brief — Prudent currency positioning ahead of key central bank decisions this week.
8. Emerging Markets Prepare for Capital Flows
The Bank of Canada is also set to reduce its rates by 25 basis points on September 17, in a coordinated move with other central banks. This global synchronization of easing policies could redirect capital flows toward emerging markets.
Analysis — This coordination among developed central banks could mark the beginning of a new global liquidity cycle, beneficial for risky assets and emerging markets.
In Brief — Coordinated central bank movement opening a new chapter for global capital flows.
Strategic Perspectives & Scenarios
Scenario Interaction
The convergence of macroeconomic, geopolitical and sectoral factors creates a particularly complex investment environment where three main scenarios emerge for the coming weeks. The interconnection between these scenarios rests on the evolution of three key variables: the magnitude of Fed easing (25 or 50 basis points), technology sector resilience facing high valuations, and companies’ ability to maintain margins in a rising cost environment.
Scenario A: Gradual Easing and Sectoral Rotation
This central scenario anticipates progressive normalization of the economic environment, with a Fed cutting rates by 25 basis points in September, followed by two additional cuts by end-2025. Inflation continues its deceleration toward 2.5% by year-end, while the labor market stabilizes around 4.2% unemployment.
- Triggers: September CPI¹ 75K, stable Q4 guidance for Big Tech, VIX maintained under 18 for two consecutive weeks.
- Estimated probability: 65% (range 60-70%)
- Possible strategies: Maintain technology overweight (35% vs 30% benchmark) with focus on AI infrastructure (Oracle, Nvidia), gradual rotation toward U.S. small caps and emerging markets benefiting from dollar weakness. 5% gold allocation as geopolitical hedge.
Scenario B: Technical Correction on Overvaluation
This defensive scenario bets on a 10-15% correction in U.S. indices, triggered by the realization that current valuations don’t reflect real economic fundamentals. The S&P 500¹ P/E ratio at approximately 20x 2026 earnings appears stretched in a slowing growth environment.
- Triggers: Disappointing guidance from Apple or Meta, downward revision > 5% of AI consensus, 10-year rates rising above 4.25%, VIX > 22 for 3 sessions.
- Estimated probability: 30% (range 25-35%)
- Possible strategies: Progressive reduction of equity exposure (from 65% to 55%), strengthening defensive positions (utilities, REITs, consumer staples), increased bond allocation (7-10 year duration to capture rate decline).
Scenario C: Accelerated Recovery via Favorable Convergence
This optimistic scenario, though unlikely, combines a more aggressive Fed (50 basis points), acceleration of generative AI adoption in the real economy, and favorable geopolitical resolution.
- Triggers: Fed 50 basis points + dovish guidance, accelerated enterprise AI adoption (Oracle Cloud revenue +50% QoQ), resolution of Ukraine or China-US tensions.
- Estimated probability: 5% (range 3-8%)
- Possible strategies: Maximize growth tech exposure (45% of portfolio), moderate leverage on AI infrastructure positions, emerging markets overweight (Asia +10%).
Risk Warning
The information and analysis presented in this article are provided for informational purposes only and do not constitute investment advice.
Going Further
This analysis is part of our fundamental research approach combining macroeconomic analysis, capital flow evaluation and monitoring of sectoral catalysts. Our upcoming publications will cover post-Fed evolution of geographical allocations and the impact of generative AI on sectoral economic models.
Watch Glossary
- Fed¹: Federal Reserve, U.S. central bank.
- VIX¹: Chicago Board Options Exchange Volatility Index, measures S&P 500 implied volatility.
- RPO¹: Remaining Performance Obligations, backlog orders not yet recognized as revenue.
- ECB¹: European Central Bank.
- AI¹: Artificial Intelligence.
- Basis point¹: Unit of measurement equal to 0.01%, used for interest rates.
- YoY¹: Year-over-Year, change compared to same period previous year.
- CPI¹: Consumer Price Index, U.S. consumer price index.
- S&P 500¹: Standard & Poor’s 500, U.S. stock index of 500 largest market caps.
Strat Finance Advisory 