Rate Cuts
Thursday, Sept 18th, 2025
World News — Bank of Canada Cut Rates
Bloomberg
The Bank of Canada cut its benchmark overnight rate by 25 basis points to 2.5% in response to a slowing economy, rising unemployment, and easing inflationary pressures tied to softening labor markets and the removal of retaliatory tariffs, while signaling a cautious approach to future moves amid trade-related risks; Governor Tiff Macklem emphasized that policymakers, though united in the latest cut, are wary of over-easing given still-present inflation concerns, leaving traders pricing in a likely October cut even as officials offered little forward guidance beyond stressing the disruptive impact of global protectionism on investment, exports, and household demand.
Tech — AI Model to Forecast Disease Risk
Economists
A team from the European Molecular Biology Laboratory and the German Cancer Research Centre has developed Delphi-2m, an artificial intelligence model trained on health data from the UK Biobank and Danish records that can predict a person’s risk of developing more than 1,000 diseases, including Alzheimer’s, cancer, and heart attacks, by analyzing the timing and sequence of past diagnoses; performing with an average accuracy score of 0.76 over five years, the model is still years away from clinical use but could eventually help doctors flag high-risk patients, guide health spending priorities, and uncover new links between diseases, making it a potentially powerful but still experimental tool in forecasting lifetime health risks.
Economics — The Fed Cut Rates, But Is That Necessary?
Economists
The Federal Reserve cut interest rates by a quarter point to 4-4.25% in a fractious meeting marked by political pressure from President Trump and dissent within the committee, but while weak jobs growth appears to justify some easing, much of the slowdown stems from collapsing immigration rather than a faltering economy, and with consumer spending strong, markets buoyant, and inflation drifting up to 2.6% under tariff pressures, looser policy risks becoming overly accommodative; one rate cut may provide insurance against labor market weakness, but further reductions could undermine credibility and force sharper reversals later.
The Daily Spark
The upward consensus revision to 2026 earnings for the S&P 500 since Liberation Day comes entirely from the Magnificent 7, see chart below.
The outlook for the rest of the economy is much more bearish: Earnings expectations for the S&P 493 have remained suppressed and are not moving higher.
The bottom line is once again that there is an extreme degree of concentration in the S&P 500, and equity investors are dramatically overexposed to AI.
Quote of the Day
“When something is important enough, you do it even if the odds are not in your favor.” — Elon Musk