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The Federal Reserve’s Wednesday decision to leave interest rates unchanged has unsettled Wall Street strategists, particularly because inflation remains sticky as oil prices remain above $100 per barrel. The choice came as the US economy expanded at a 3.4% annualized rate in the third quarter.

Ed Yardeni of Yardeni Research was among those questioning the central bank’s judgment. “In our view, the decision was puzzling,” Yardeni wrote last week.

“It reminds us of someone standing in a room with a fire alarm blaring and smoke pouring under the door, yet insisting on more evidence before calling the fire department,” he noted. Yardeni highlighted the third quarter economic growth figure while criticizing the decision.

The debate has also revived questions about the Fed put, the idea that the central bank will support financial markets by lowering interest rates or supplying liquidity when asset prices decline. Some strategists now believe that policy tool could return to the forefront.

“The Fed put is very much back,” Darius Dale, founder of 42 Macro, said on Yahoo Finance on Thursday. Dale expects greater coordination between the Federal Reserve and the Treasury as policymakers seek to influence the bond market, which the government uses to issue debt.

That coordination could eventually involve officials stepping in to buy back government bonds. According to the scenario outlined by Dale, those purchases could use cash backed by the Fed.

Such action would give policymakers additional capacity to calm nervous bond markets and deliver a liquidity boost next year. The possibility is shaping how investors view the recent movement beneath the surface of the stock market.

Rather than abandoning stocks broadly, investors have continued shifting money between market sectors. That rotation has persisted despite concerns about inflation, elevated interest rates, and renewed anxiety surrounding artificial intelligence investments.

“This is a market that continues to rotate instead of go down,” Dale said. “The market might be looking — eyes on the prize — at a liquidity rescue in 2027.”

Most of the selling in recent sessions has been concentrated in technology shares. The pressure has not spread evenly across the wider market, supporting the argument that investors are rotating rather than rushing toward a broad exit.

Concerns about artificial intelligence funding have weighed on parts of the AI trade. Investors are also assessing the effects of artificial intelligence on businesses including Google search software, while quarterly results from Intel and Amazon have added further pressure.

Other corners of the market have moved in the opposite direction. Healthcare, represented by XLV, Financial Services, represented by XLF, and Real Estate, represented by XLRE, recorded gains last week.

Over the past month, every sector except Technology, represented by XLK, and Communications Services, represented by XLC, has rallied, according to Yahoo Finance’s AlphaSpace data. That performance highlights the sharp divide between struggling technology related areas and the rest of the market.

“Beneath the hood, the fundamentals of this AI wave still remain really robust,” Stephanie Aliaga, global market strategist at JPMorgan Global Asset Management, told Yahoo Finance. Her assessment suggests the underlying AI theme remains intact even as investors become more selective.

“But we are entering a more discerning phase of this AI trade, and not every company is going to shine as bright, particularly in an environment with higher financing costs,” Aliaga added. She also said current bond yields make fixed income attractive for portfolio additions.

UBS strategists likewise said high quality bonds can help stabilize portfolios. Attractive yields can provide investors with income even when bond prices fluctuate, offering another option as technology stocks face greater scrutiny.

“We continue to see scope for equity gains overall and believe investors should focus on building a resilient portfolio that includes exposure beyond tech,” said Ulrike Hoffmann-Burchardi, chief investment officer of the Americas and global head of equities at UBS. The strategy combines continued equity exposure with broader diversification beyond the market’s technology leaders.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.