Fed Governor Christopher Waller just broke ranks. He said Friday that he doesn’t expect tariffs to boost inflation significantly so policymakers should be looking to lower interest rates as early as next month. Meanwhile, Powell holds his wait-and-see position. That split creates a simple trade setup for individual investors.
Here’s exactly what to buy and when.
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The Setup: July Becomes the Timing Catalyst
Waller said he thinks the Fed should cut to avoid a potential slowdown in the labor market. “If you’re starting to worry about the downside risk [to the] labor market, move now, don’t wait,” he said. That’s a direct challenge to Powell’s cautious approach.
The July 29-30 FOMC meeting becomes the decisive moment. CME FedWatch shows approximately a 22.7% probability of a 25 basis point rate cut in July, with higher likelihood (65.3%) of a cut in September. Yet Waller’s positioning suggests July pressure could shift those odds.
Individual investors can position ahead of this showdown with specific ETF plays that benefit regardless of which Fed faction wins.
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The Trade: Utilities ETFs Benefit From Rate Positioning
The utilities sector shows strength as rate cut expectations build. Utilities require huge infrastructure, which creates massive debt burdens and interest obligations. Lower rates benefit their borrowing costs immediately.
XLU offers individual investors the clearest way to play Fed rate uncertainty. The math works simply: XLU is designed to mirror the performance of the utilities sector within the S&P 500, encompassing companies that provide essential services such as electricity, natural gas, and water.
Key benefits for your portfolio:
- Dividend yield: XLU pays consistent dividends from stable utility cash flows
- Rate sensitivity: When rates drop, utilities benefit immediately from lower borrowing costs
- Defensive positioning: Utilities perform during economic uncertainty
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The Treasury Bet: TLT Amplifies Rate Cut Moves
For more aggressive positioning, the iShares 20+ Year Treasury Bond ETF (TLT) amplifies any Fed rate movement. TLT’s average duration is about 16 years. A 100-basis point decline in rates would translate into a 16% gain in price for TLT.
Since the start of the year, TLT has seen inflows of $976 million, the sixth-most of all U.S.-listed exchange-traded funds. Smart money builds positions before rate cuts happen.
The risk profile: TLT amplifies moves in both directions. If Powell wins and rates stay higher longer, TLT drops hard. If Waller’s faction forces July cuts, TLT jumps significantly.
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Your 401k Strategy: Position Before July Decision
Here’s the practical framework for individual investors:
Conservative Approach (XLU):
- Add 5-10% utilities allocation to your portfolio
- With a relatively low expense ratio of 0.09%, XLU provides cost-effective access to the utilities sector
- Hold through July Fed meeting for rate sensitivity benefit
- Keep position for dividend income regardless of Fed outcome
Aggressive Approach (TLT):
- Allocate 3-5% to long-term Treasury bonds through TLT
- Target entry before July 29 Fed meeting
- Set stop-loss if position moves against you by 5%
- Take profits if TLT jumps 10%+ on rate cut news
The Timing Window: Watch for Waller’s continued pressure on Powell through July. Eight officials estimated two rate cuts this year, compared with nine who made that prediction in the March round of projections, while seven saw no cuts this year compared with the four officials who made that call previously. That split creates opportunity.
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The Bottom Line: Position for the Split, Not the Outcome
The Fed governance fracture creates specific investment opportunities. XLU benefits from rate uncertainty and eventual cuts. TLT amplifies any rate movement in either direction.
Individual investors gain advantage by positioning before July’s decision rather than reacting after. The setup benefits from Fed chaos, whether Waller forces Powell’s hand or Powell maintains control.
Buy utilities for steady positioning. Consider treasuries for amplified moves. Position before July 29. Profit from institutional uncertainty.
Stay sharp. Stay sovereign.
— Reed
Reed Holloway writes for Wealth Creation Investing on the intersection of financial sovereignty, economic policy, and systemic risk. His work exposes government overreach, defends hard-asset strategies, and challenges the narratives that mask deeper economic instability.