The Fed didn’t move – but investors should

Investors looking only at the surface of the Fed’s latest decision risk missing what really matters, writes Nigel Green.

This is not a time for investors to be passive, believes Nigel Green. Pic via Getty Images

The Federal Reserve did exactly what markets expected midweek: it held rates steady. No surprises, no fireworks. But investors looking only at the surface risk missing what really matters, writes Nigel Green.

Beneath the calm lies a shift that’s already underway, and the window to act is narrowing.

While the Fed opted to leave its benchmark rate unchanged in the 4.25% to 4.50% range, all signs now point to a September cut.

The official decision may be to pause, but the broader economic signals are flashing amber. We are past the peak, and the central bank knows it.

Dissent is creeping into the Fed’s commentary. That’s not an accident. When policymakers begin breaking ranks in public, it’s because they’re seeing the same things we are: a cooling economy, more caution among consumers, and a fundamental change in how growth is being generated.

On paper, the US economy still looks solid. GDP rose 3.0% in Q2, and headline inflation continues to retreat. But look closer, and the story changes. Imports fell sharply, artificially boosting growth figures, while core domestic demand slowed. Business investment lost momentum. Consumer spending, while still positive, softened compared to the previous quarter.

This is not what strong, self-sustaining growth looks like. It’s what a gradual deceleration looks like: one that calls for policy adjustment.

The US consumer remains remarkably resilient, but there’s a subtle behavioural shift happening. People aren’t pulling back en masse, but they’re becoming more deliberate. They’re thinking twice before making discretionary purchases, and adjusting their priorities in ways that will ripple across sectors.

For investors, this matters more than any single Fed statement because when the public becomes more cautious, capital follows.

 Sectors that once thrived on confidence and momentum may underperform, while others – typically more global, defensive, or yield-oriented – could see renewed attention.

The question now is not if the Fed will pivot, but when. And based on the data, the internal dynamics of the Fed, and the tone of recent communications, September is emerging as the inflection point.

There are still risks, of course. Rate cuts alone won’t insulate portfolios from geopolitical friction, shifting trade dynamics, or unexpected inflationary sparks. But the point is this: a policy change is coming, and it will impact pricing, sentiment, and positioning across asset classes.

This period between now and September should be viewed as a strategic window. A time to reassess exposures. To stress test assumptions. To make sure your portfolio reflects the real economy, not just the headlines.

We are entering a new phase, one which is characterised by lower inflation, slower growth, and soon, lower interest rates. This shift will reward those who move early and decisively.

That doesn’t mean chasing short-term trades. It means building resilient portfolios: diversified across regions, balanced between risk and return, and tilted toward quality. In a world of thinner growth, the premium on selectivity rises.

It also means recognising that markets can be misleading in the short term. The response to the Fed’s hold may well be initially positive – stability, after all, is welcomed.

However, that enthusiasm could fade as investors digest the underlying data. A slowing economy doesn’t mean a recession is imminent, but it does mean that broad-based expansion is no longer the tailwind it once was.

Monetary policy works with lags. What we’re seeing now is the delayed effect of last year’s tightening cycle.

The heavy lifting has already been done – inflation has cooled meaningfully — and now the risk has shifted. Keeping rates too high for too long risks overtightening into a softening economy.

The Fed, for all its caution, is aware of this. By pausing now, it’s buying time. But it won’t wait indefinitely.

For investors, the message is clear: don’t wait for the rate cut to reposition. By the time it arrives, markets will already be adjusting. The opportunity is to act before the consensus shifts.

If the Fed does move in September – and I believe it will – it will mark the start of a different era in monetary policy. One that prioritises sustaining modest growth over stamping out already-fading inflation. One that will favour global allocation, active management, and quality over quantity.

This is not a time to be passive. The Fed may be sitting still, but you shouldn’t be.

Nigel Green, is the group CEO and founder of deVere Group, an independent global financial consultancy.

The views, information, or opinions expressed in the interviews in this article are solely those of the author and do not represent the views of Stockhead.

Stockhead does not provide, endorse or otherwise assume responsibility for any financial advice contained in this article.

Originally published as The Fed didn’t move – but investors should