In 2025, the U.S. Federal Reserve cut interest rates three times due to soaring unemployment, despite elevated inflation levels. Most Fed policymakers anticipate at least one more cut in 2026, with Wall Street predicting two. The AI boom also boosted tech company value and the S&P 500 hit record highs last year.

Falling interest rates reduce debt costs and boost corporate profits, but also signal economic concerns. The Fed’s efforts to contain rising unemployment may lead to more rate cuts in 2026. Lower rates can stimulate economic growth but may also precede a potential recession, impacting stock portfolios.

The Federal Reserve aims to maintain price stability and full employment, with inflation above target and unemployment rising in 2025. Weak job reports prompted December rate cuts, the third of the year. Policymakers foresee additional cuts in 2026 due to economic cracks, supported by Wall Street predictions.

Fed’s recent rate cuts are expected to boost economic growth in 2026. Despite potential market benefits, rising unemployment may signal a recession, affecting stock market performance. Investors should monitor job market weakness as a potential indicator of economic downturn.

The S&P 500 ended 2025 near a record high, reflecting long-term market resilience despite short-term fluctuations. Investors should consider buying opportunities in a potential economic downturn. The Motley Fool Stock Advisor identifies top stocks for high returns, offering market-beating performance compared to the S&P 500.

Read more at Yahoo Finance: Here’s When the Federal Reserve Is Expected to Cut Interest Rates in 2026, and What It Means for the Stock Market