The Fed’s First Cut of 2025

The Federal Reserve delivered its first rate cut of the year on September 17, 2025, lowering the federal funds target range to 4.00–4.25%. Chair Jerome Powell called it a “risk-management” step, balancing inflation risks with a softening labor market. The Financial Times noted the Fed left the door open to more cuts before year-end.

Falling Cash Yields

Robo clients will first feel the impact through cash yields. When the Fed cuts, banks and brokerage programs usually reduce cash sweep rates, which robo platforms rely on. Barron’s reported yields are already drifting lower, while BlackRock highlights how falling cash returns shift portfolio dynamics. Wealthfront makes clear that its APY directly tracks Fed moves.

The Problem of Idle Cash

After two years of high yields, many investors let unallocated cash pile up in robo accounts. With lower rates, the real return is shrinking. Investopedia notes some high-yield accounts and Treasuries still pay more than sweeps—but those too will fall as cuts continue. The bottom line: investors should review whether excess cash still belongs in “savings” buckets or in the portfolio itself.

Bond Math Gets Friendlier

Cuts also make bonds more attractive. Falling rates push existing bond prices higher, especially in intermediate maturities. Robo portfolios built on bond ETFs can benefit. Morningstar reported record inflows into bond ETFs in anticipation of cuts, and iShares suggests the “belly” of the curve could be favored in a soft landing scenario.

Fees Stay the Same

Robo-advisory fees don’t budge with Fed policy. Most digital portfolios still charge around 0.25% annually, while broker-affiliated platforms may advertise “zero fees” but monetize in other ways. NerdWallet’s comparison shows why investors need to read the fine print closely.

Cash Drag Returns to Focus

The Fed’s cuts revive questions around cash drag. In 2022, the SEC fined Schwab for steering robo portfolios into large cash allocations without clear disclosure. As yields fall again, this risk returns. AdvisorHub noted the lesson: “no advisory fee” can still mean hidden costs if portfolios carry too much cash.

Understanding Account Protections

Investors should also review protections. Cash inside a brokerage account is covered by SIPC insurance, while standalone cash accounts rely on FDIC coverage. Some fintechs split deposits across multiple banks to extend FDIC coverage, but investors should know which model their robo uses.

Why Discipline Still Matters

A cutting cycle doesn’t equal “all clear.” Powell has said policy remains “mildly restrictive,” and Chicago Fed President Austan Goolsbee noted that while there’s room to ease, the Fed must move carefully. For investors, this argues for systematic rebalancing—a process robo-advisors are built to handle—rather than betting on every CPI headline.

What Surmount Users Should Do Now

• Audit cash: Review how much sits in cash and what it earns (Barron’s).

• Embrace the rebalance: Falling rates shift bond/equity balance—let the system handle it (Morningstar).

• Mind the fine print: Check your robo’s disclosures on cash allocations (SEC).

• Stay systematic: Stick to rules-based investing despite headlines