Why I Believe Rate Cuts Are Off the Table

by Roger Scott | May 4, 2026

If you’ve been expecting the Federal Reserve to signal rate cuts anytime soon, it’s not happening. Three Fed officials recently dissented over the FOMC policy statement because they no longer believed it was appropriate to suggest the next move would likely be a cut — and they’re right.

We’re in a wait-and-see environment, not a cut environment.

Even major geopolitical headlines aren’t moving markets the way they used to. The war was a powerful catalyst early on, but now it barely impacts price action. Energy moves, sure — but war itself doesn’t. The VIX is sitting below 20, and that tells you markets are far less reactive to shocks. When markets stop jumping at every headline, policymakers become even more patient.

The economic picture adds even more uncertainty. Unemployment is holding near multi-decade lows. CPI cooled but PPI ran hot. Oil-driven inflation — while not new — continues to push prices broadly higher.

Persistent energy-related pressure keeps the Fed cautious, because as long as supply-driven inflation stays sticky, they can’t ease without risking another flare-up.

Why Market Structure Leaves Little Room for a Fed Pivot

Fed governors Neel Kashkari, Beth Hammock and Lorie Logan have all hinted that the next move could be either up OR down instead of just down. That ambiguity is the right call.

Under the surface, the market isn’t nearly as strong as headline numbers suggest. Market breadth is thinning fast. Nearly 44% of the Nasdaq 100 (QQQ) and close to 47% of Financials (XLF) are trading below their 200-day moving averages.

It’s very hard for the S&P 500 to push meaningfully higher without banks also moving higher.

Momentum is fading too. Only 253 stocks are making one-month highs, down sharply from the nearly 900 that did so recently. That kind of contraction tells you rallies lack depth and traders shouldn’t mistake scattered pockets of strength for a broad trend.

At the same time, the market has grown increasingly desensitized to bad news. Negative developments cause smaller and smaller reactions, especially in energy markets, which speaks to a normalization phase rather than an expansion phase.

The Bond Market Is the Real Constraint

One of the biggest obstacles to rate cuts isn’t inflation — it’s the bond market. Long-dated Treasurys, like the iShares 20+ Year Treasury Bond ETF (TLT), continue to break lower.

When long bonds slide, yields rise, and that tightens credit conditions quickly. If the bond market breaks further, the economy will feel real credit pain. The Fed knows this, and keeping rates elevated helps stabilize demand for Treasurys. Cutting now would only add stress to an already fragile part of the financial system.

Fed fund probabilities show a 94.8% chance of no change and a 5.2% chance of a minor cut at the June meeting. Strong earnings — even exceptional earnings from Apple (AAPL) — can’t override structural risks in bonds, credit and market breadth.

The bottom line is simple: Don’t position your portfolio around fantasies of imminent cuts. Stay flexible, watch the data and keep risk contained.

I hope that helps!

Roger Scott
Roger Scott Trading

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