U.S. Rate Cuts, Tax Cuts, and Stock Rebounds

On Wednesday, the Federal Reserve is expected to announce no change to its monetary policy. Fed watchers widely expect the FOMC to keep interest rates unchanged. Bond markets are already pricing in this decision, with the widely traded 20+ Year Treasury Bond ETF (TLT) trending lower.An accelerated Fed rate cut path, however, may unfold. Oxford Economics wrote that a sustained rise in oil prices would pressure the Fed to cut rates. This would require the conflict between Iran and Iraq to persist for longer. Currently, markets are already speculating that Iran wants to have a peace settlement.Military stocks like RTX (RTX) traded higher on Monday. Lockheed Martin (LMT) dropped by 3.99% to close at $467.06. L3 Harris (LHX), Northrop Grumman (NOC), and AeroVironment (AVAV) all traded lower. Markets are pricing in a resolution in the Middle East.Tax CutsIn political news, the Senate Republicans proposed a cut worth trillions in household and business taxes. That would require decreasing health care given to some low-income Americans. Most importantly, the bill would still eliminate taxes on tips. That would help restaurant firms thrive. Chipotle (CMG) and Starbucks (SBUX) would rebound in response.The S&P 500 (SPY) and Nasdaq (QQQ) let the stock rebound from last Friday’s market drop. This will continue so long as the tension between Israel and Iran eases.