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Fed Hit Pause, And The Market Said Ok Cool, We’ll Overthink It Anyway

Author

Noah Zelvis
February 01, 2026

The Fed finally did the thing everyone jokes about and almost nobody believes: it sat still.

Rates held at 3.5% to 3.75%, and the bigger message was basically, we can chill here for a bit while we see whether inflation behaves or the job market cracks first.

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This was the first hold since July, and it came with a little spice:

  • Vote was 10–2, with two governors dissenting in favor of a quarter-point cut.

  • That matters because the Fed usually tries to move as a pack. More dissents usually means more uncertainty, not necessarily a faster pivot.

  • The Fed is still stuck between two realities:

    • Inflation has not convincingly fallen back to 2%. It has been sticky for a while.

    • The labor market has cooled, but unemployment has stabilized, which makes it harder to justify rushing into more cuts.

The other layer here is politics and perception. Powell is dealing with heavy outside pressure while his chair term ends in May, and markets are watching what a leadership change could mean for the Fed’s independence and how clean the decision-making process feels.

What investors should actually take from this is simple:
This is not a restart-the-cutting-cycle moment. It is a hold-and-wait regime where the Fed wants flexibility, and the market will react more to each data print because the path is less scripted.

And yes, tariffs are in the mix. The Fed is basically trying to separate “tariff price bumps” from “demand-driven inflation,” because the second one is the scary one.

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Actionable Stuff

  • Treat this like a patience market. Big “rate bet” swings are harder when the Fed is openly non-committal.

  • Favor businesses that do fine without a rate tailwind. Strong cash flow, pricing discipline, recurring revenue.

  • Use volatility as a feature. A more divided Fed can mean choppier rates and more repositioning. Some companies literally get paid when markets do that.

  • Be careful with pure rate-sensitive trades. Homebuilders, small caps, and long-duration growth can pop on cut hopes, then faceplant on one sticky inflation print.

  • Think barbell. Own durability on one side, and selective “cuts eventually” beneficiaries on the other.

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Top Picks

CME Group (NASDAQ: CME)

If the Fed is in wait mode and the path forward is fuzzy, markets tend to trade the narrative harder. That’s good for CME because it sits at the center of futures and derivatives tied to rates, equities, commodities, and more. The point is not to predict direction. The point is that uncertainty and repositioning usually mean more hedging, more volume, more activity.

In a world where every jobs report and inflation print can swing expectations, CME can quietly benefit from the market doing what it always does: obsess, adjust, repeat.

What to watch: Trading volume trends and any pickup in interest-rate complex activity.

Intercontinental Exchange (NYSE: ICE)

ICE is another “gets paid when markets move” name, with major exposure to energy and financial markets plus a data and analytics business that tends to be steadier than people assume. If the Fed is more divided and the macro backdrop keeps flipping between inflation worry and growth worry, hedging demand can stay elevated.

It’s also a cleaner way to own market plumbing without having to pick winners among banks or brokers.

What to watch: Exchange volume trends and growth in recurring data services revenue.

Charles Schwab (NYSE: SCHW)

Schwab is a classic “cuts eventually” beneficiary, but it does not need cuts tomorrow morning to work. When rates are high, clients park cash in money funds and other yield products. When rates slowly come down, the industry often sees cash sorting normalize, and net interest margin pressure can ease.

In a hold-first regime, Schwab is basically a patience trade: you are not buying the next meeting, you are buying the next phase. And if markets stay calm while rates stay steady, activity and asset values can still support the model.

What to watch: Net interest margin commentary and client cash allocation trends.

Waste Management (NYSE: WM)

This is the boring pick on purpose. When the Fed is waiting, inflation is sticky, and hiring is cooling but not collapsing, the best move is often to own businesses that do not need macro perfection. Waste Management is a steady, repeat-demand model with pricing and route density advantages, and it tends to behave well when investors rotate toward reliability.

If the market gets more jumpy around Fed politics and rate-path uncertainty, boring cash-flow compounders can look even better.

What to watch: Pricing vs. cost commentary and margin stability.

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Bottom Line

The Fed held rates at 3.5%–3.75% and offered no urgency about restarting cuts. With a 10–2 vote, political noise in the background, and inflation still not fully cooperating, the play is to assume a longer wait with more headline-driven swings.

So position like it: own durability, keep a measured “cuts eventually” sleeve, and let volatility work for you instead of against you.

That’s it for today’s edition—thanks for reading! Reply to this email with any feedback or let me know which macro trends or markets you’d like me to cover next.

Best Regards,
—Noah Zelvis
Macro Notes