The Fed's Grand Performance: A Market Sleepwalk to September

A dramatic monologue from your portfolio, August 14, 2025

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Listen. I've been sitting here in your brokerage account for months, watching this slow-motion ballet of monetary theater, and I need to tell you something: Tuesday's inflation report was the financial equivalent of watching paint dry on purpose.

The July CPI came in exactly as expected—2.7% year-over-year, 0.2% monthly—and the market responded like a Pavlovian dog hearing its favorite bell. All-time highs again, driven by expectations for lower interest rates. Powell's September rate cut is now baked into every algorithm from here to Singapore.

But here's what's eating at me: this isn't victory. This is sleepwalking.

You want to know what Tuesday really was? It was the Fed getting exactly what it ordered from the inflation menu, served at exactly the right temperature, with exactly the right garnish. No surprises. No volatility. No actual price discovery. Just a mechanical march toward 2% that somehow validates every risk asset on the planet.

Wall Street's "calm" yesterday should terrify you more than any flash crash ever could. When markets move in perfect harmony with central bank expectations, when every data point lands within the whisker of consensus, when volatility dies this quietly—that's when you know the real risk is building somewhere you can't see it.

Think about what we're celebrating here. Inflation stayed exactly where it was last month while everyone pretends this gives Powell permission to cut rates in September. Meanwhile, your S&P 500 positions are hitting new records based on... what exactly? The promise that money will get cheaper? The assumption that corporate earnings will somehow justify these valuations when the sugar high wears off?

I've been through enough cycles to recognize this feeling. It's the same electric calm that settled over portfolios in early 2000, in mid-2007, in February 2020. Markets moving up not because of fundamental strength, but because of fundamental certainty that the Fed will keep the party going.

We already had our tantrum earlier this year—remember the spring crash that wiped out winter gains before the summer recovery? That was the market testing the Fed's resolve. Powell blinked first. Now we're all addicted to his consistency.

The real story Tuesday wasn't the CPI print. It was how desperately the market needed that print to be unremarkable. Every basis point of surprise, every tenth of deviation from consensus, gets magnified through a system that's forgotten how to function without perfect central bank choreography.

Here's my prediction: September's rate cut will be the most telegraphed, most expected, most perfectly priced monetary policy move in Fed history. And that's exactly when something breaks.

Not because the cut is wrong—it might be exactly right. But because markets that need this much hand-holding, this much advance notice, this much certainty about every central bank move, are markets that have forgotten how to price actual risk.

Your positions are flying high on the assumption that Powell's September cut opens the floodgates for more cuts, more liquidity, more everything. But what happens when the next data point doesn't land exactly where consensus expects? What happens when the Fed's perfect inflation choreography hits a discordant note?

I'm not saying sell everything. I'm saying remember that this perfect calm, this beautiful convergence between market expectations and central bank delivery, never lasts as long as it feels like it should.

The Fed's grand performance continues. The audience is mesmerized. But somewhere in the wings, reality is waiting for its cue to return to the stage.

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Keep watching the margins. They always crack first.