In the latest episode of Breaking Battlegrounds, hosts Chuck Warren sat down with Gary Gygi, president of Gygi Capital Management, to unpack one of the biggest questions on Wall Street this week: how far will the Federal Reserve go with its next interest rate cut — and what does that mean for the markets?

Warren opened by reflecting on the nonstop nature of today’s economy and politics. “The one thing with Trump,” he joked, “you wake up every day and nothing’s boring.” Between the administration’s latest visit to China and signs of a potential trade framework, the hosts turned to what many Americans are really watching — whether the Fed will finally ease rates and what that means for everyone from homebuyers to construction companies.

“Something that really would be helpful for Americans,” Warren said, “is if the interest rates got lowered.”

Gygi agreed that relief is likely coming — but not as much as some may hope. “A point five, which is half of a percent — no, Chuck, I don’t,” he explained. “We’re probably going to get a quarter of a point. We call that 25 basis points.”

He noted that the Fed typically moves incrementally, preferring smaller 0.25% adjustments rather than larger, riskier ones. “If they’re doing more than that, that can spook the market,” Gygi said. The reasoning? Bigger cuts suggest the Fed might be panicking — and markets pick up on that fear fast.

“If we were to get a half a point,” he warned, “the market could get freaked out, ’cause it thinks, uh oh, things are worse than what we think.”

A more measured move, on the other hand, could steady investors. Gygi pointed out that markets are currently pricing in a 96% probability of a quarter-point reduction — a signal that most traders have already baked it in. “If it’s 25 basis points,” he said, “the market takes that in stride and just goes, okay, we may not need it, but we want this.”

The conversation then turned to who benefits most. According to Gygi, small-cap stocks could see the strongest reaction. These companies rely heavily on public lending to fund operations, so even a small drop in borrowing costs directly improves their margins. “Small stocks in particular [are] probably going to rally the most,” Gygi said, “just because small companies have to go to the public lending areas in order to fund their businesses all the time.”

Meanwhile, the broader market seems optimistic. Warren pointed out that the S&P had rallied 1% and was poised to close “over 6,800 for the first time” — a milestone Gygi agreed was significant.

So what’s the bottom line? In a moment when global uncertainty and trade politics dominate the headlines, the Fed’s next move could either reassure investors or rattle them. A quarter-point cut may seem minor, but as Gygi explained, it’s a signal of stability — not panic.

Sometimes, slow and steady really does win the market.

Transcript

**Chuck Warren: **Welcome back to Breaking Battlegrounds. We’re honored to have with us again our friend Gary Gygi. He is the president of Gygi Capital Management. You can find him at gigicapital.com. G-Y-G-I capital with an A dot com. Don’t mess up your O’s and A’s with capital, folks. Gary, welcome back to the show, buddy.

Gary Gygi: Good to be here. Thanks, guys.

Chuck Warren: All right. So I don’t know where to start in this economy. The one thing with Trump, you wake up every day and nothing’s boring. Right? I mean, you sort of one day, I think Kylie, you and I were talking about a couple weeks ago, like it would just be nice to have a boring day. Right? And nothing’s boring about this man. So now he’s in China. Sounds like we have a framework for an agreement, things of those nature. But something that really would be helpful for Americans, for the construction industry, everything, is if the interest rates got lowered.

Gary Gygi: Absolutely.

Chuck Warren: Do you feel we’re going to see a 0.5 cut or what do think’s going to happen? Yeah.

Gary Gygi: So a point five, which is half of a percent, no Chuck, I don’t. And I think that we’re probably going to get a quarter of a point. We call that 25 basis points. so historically, the Fed has moved incrementally. When it raises interest rates, it does it by a quarter of a point each time, usually. Same thing when they’re lowering rates. It’s usually quarter of a point. If they’re doing more than that, that can spook the market.

Chuck Warren: Oh, OK.

Gary Gygi: And so right now, that the market is expecting it there like a 96% probability market says that we’re to get a twenty five basis point or one quarter of one point reduction this week. If we were to get a half a point the market could get freaked out cause it thinks uh oh things are worse than what we think.

**Chuck Warren: **Great point.

**Gary Gygi: **And and and so now the market would probably sell off thinking that the fed is behind the curve. If it’s 25 basis points or a quarter of a point. I think the market takes that in stride and just goes, okay, we may not need it, but we want this. And so we’re probably going to rally. So small stocks in particular, probably going to rally the most just because small companies have to go to the public lending areas in order to fund their businesses all of the time.

So if all of a sudden they’re borrowing at lower rates, that’s going to make them more profitable. So assuming we get 25 basis points, a quarter of a point, I think small caps rally hard and the other stocks will probably rally as well. If it’s 50 basis points or half a point, my feeling is the stocks probably sell off.

**Chuck Warren: **That is a great point and it makes a lot of sense, especially since we supposedly have a China trade truce.

Gary Gygi: Yes.

**Chuck Warren: **The S&Ps rallied 1 % today. Probably gonna close over 6,800 for the first time.

Gary Gygi: Looks like it.

**Chuck Warren: **Yeah, that’s a big deal, right? So.

**Gary Gygi: **Yes.

Listen to the full episode of Breaking Battlegrounds anywhere you stream your podcasts!