Rate Cuts, Market Cheer, and the Magic of Securitization

David Halseth
Sep 21
2 min read

For the week ended 9/20/2025.

Welcome to the week and yet another glorious fall day. Let’s get right into it, shall we?

As we all know by now, Jerome and Co. performed as expected and cut baseline rates by 25 bps last week – supposedly reducing the cost of capital for the good old U.S. of A. That means cheaper mortgages, cars, and – why not – more GLP-1 drug development.

Yes, this was the first cut in nine months as weakness in the labor market finally outweighed inflation concerns. Powell underscored the shift, noting recent declines in job seekers and actual hires have “certainly gotten everyone’s attention.” For emphasis, he repeated the phrase “downside risk” six times. Subtle.

Markets approved. The S&P 500 rose a solid (if not spectacular) 1.2% on the week and now sits up 14.4% YTD, 18.2% over the past year. Considering the economic and political circus of the past 12 months, that’s remarkable. The mantra “don’t bet against the USA” still has legs.

Even bonds are (begrudgingly) playing along. While down 20 bps last week, they’re still up 6.2% in 2025. Foreign equities? A blistering 26% YTD, though much of that is courtesy of a weaker dollar. Never underestimate the power of currencies.

Speaking of which, the U.S. advantage over Europe isn’t just economic growth – it’s structural. Our markets are more open, more competitive, and more liquid. Take securitization: bundling mortgages, credit card receivables, and auto loans into securities spreads risk, frees up capital, and lowers costs across the economy. In 2024, Europe issued ~$250B in securitized debt. The U.S.? Nearly $2T. Out of our $30T economy, $15.2T sits in securitized instruments. Europe’s $20T economy has just $1.3T. The difference? Night and day.

And with that, may you enjoy your week. Stay productive, stay healthy, and get outside for the fall colors.