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INDPRO (103.9506)
UMCSENT (48.1)
CPIAUCSL (336.298)
CPILFESL (338.896)
DCOILWTICO (103.37)
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RRPONTSYD (4.375)
WALCL (6745635)
WTREGEN (999727)
DFII10 (2.63)
DGS10 (4.98)
DGS2 (4.61)
FEDFUNDS (3.75)
SOFR (3.94)
T10Y2Y (0.38)
FRED // FEDFUNDS
Effective Federal Funds Policy Rate
YIELDS Monthly
OBSERVATION DATE: 2026-09-01 • UNIT: %
LATEST OBSERVATION
3.75 %
PRIOR / PERIOD Δ
3.63 (+ 0.12)
YOY CHANGE
-0.47 %
FEDFUNDS // Effective Federal Funds Policy Rate (%)1Y: -0.47 (-11.1%)
2026-09-01OBSERVATION: 3.75% (%)
11 S&P 500 GICS SECTOR PEARSON CORRELATION MATRIX VS. FEDFUNDS SORTED TAILWIND (+r) ──► HEADWIND (-r)
| ETF | GICS SECTOR | PEARSON r | CORRELATION BAR (-1 TO +1) | R² | BETA / REGIME TRANSMISSION |
|---|---|---|---|---|---|
| XLE | Energy | +0.09 r | | 1% | [+0.84% per +25 bps] Modest pro-cyclical beta benefit on rising FEDFUNDS |
| XLP | Consumer Staples | +0.02 r | | 0% | [+0.09% per +25 bps] Low-beta regime neutral across 5Y FEDFUNDS cycle (258W) |
| XLV | Health Care | -0.00 r | | 0% | [-0.01% per +25 bps] Low-beta regime neutral across 5Y FEDFUNDS cycle (258W) |
| XLB | Materials | -0.01 r | | 0% | [-0.04% per +25 bps] Low-beta regime neutral across 5Y FEDFUNDS cycle (258W) |
| XLI | Industrials | -0.02 r | | 0% | [-0.12% per +25 bps] Low-beta regime neutral across 5Y FEDFUNDS cycle (258W) |
| XLF | Financials | -0.09 r | | 1% | [-0.62% per +25 bps] Defensive/rate-sensitive drag during FEDFUNDS upswings |
| XLU | Utilities | -0.09 r | | 1% | [-0.63% per +25 bps] Defensive/rate-sensitive drag during FEDFUNDS upswings |
| XLK | Technology | -0.10 r | | 1% | [-0.94% per +25 bps] Defensive/rate-sensitive drag during FEDFUNDS upswings |
| XLRE | Real Estate | -0.10 r | | 1% | [-0.75% per +25 bps] Defensive/rate-sensitive drag during FEDFUNDS upswings |
| XLY | Consumer Discretionary | -0.17 r | | 3% | [-1.45% per +25 bps] Defensive/rate-sensitive drag during FEDFUNDS upswings |
| XLC | Communication Services | -0.21 r | | 4% | [-1.53% per +25 bps] Defensive/rate-sensitive drag during FEDFUNDS upswings |
AI MACRO REGIME IMPACT BRIEF RESTRICTIVE
FED RAISES EFFECTIVE FUNDS RATE TO 3.75%: SEQUENTIAL TICK (+12 BPS) SIGNALS HAWKISH PAUSE DEFENSE AMID RESTRICTIVE MULTIPLE COMPRESSION
The unexpected +0.120% sequential uptick in the Effective Federal Funds Rate to 3.75% from 3.63% (down -0.47% YoY vs trailing high of 5.33%) confirms policy remains firmly in restrictive territory above neutral r*. This front-end yield firming steepens short-duration cost of capital, re-widening discount rates against long-duration cash flows while stressing levered consumer balance sheets. Cross-asset allocations must lean into cash-generative inflation hedges and defensive low-beta shelters as rate-sensitive cyclicals absorb negative multiple repricing.
▲ REGIME TAILWIND SECTORS
XLE // Energy
Holding the highest correlation in the complex at Pearson r = +0.09 with a positive beta sensitivity of +0.84% per +25 bps, Energy benefits from elevated front-end nominal activity and acts as an unhedged natural margin hedge against late-cycle nominal demand resilience.
XLP // Consumer Staples
Exhibiting an uncorrelated, defensive Pearson r = +0.02 and beta sensitivity of +0.09% per +25 bps, Staples provide non-cyclical pricing power and steady margin insulation from higher debt-servicing burdens impacting enterprise capex.
XLV // Health Care
With an anchored Pearson r = -0.00 and near-zero beta sensitivity of -0.01% per +25 bps, Health Care acts as a duration-neutral defensive sanctuary insulated from restrictive terminal rates and corporate refinancing friction.
▼ REGIME HEADWIND SECTORS
XLC // Communication Services
Posting the steepest negative sensitivity at Pearson r = -0.21 (R² = 0.04) and -1.53% per +25 bps, long-duration digital ad platforms and media cash flows face immediate equity multiple compression as policy remains locked at 3.75%.
XLY // Consumer Discretionary
Severe drag characterized by Pearson r = -0.17 (R² = 0.03) and a -1.45% decline per +25 bps rate hike; tight policy transmission suppresses household discretionary credit and escalates revolving debt debt-service burdens.
XLK // Technology
High structural duration leaves Tech exposed to a Pearson r = -0.10 and -0.94% beta sensitivity per +25 bps, as elevated short rates increase WACC hurdles and curtail aggressive forward valuation multiples.
HISTORICAL ANALOG // Late 1999–Early 2000 Fed Policy Tightening / Q4 2018 Rate Plateau: Mirrors periods where the Fed held policy rates in high restrictive bands (~3.75%-5.00%) with late-stage incremental hawkish nudges. Factor leadership heavily rewarded Value, Energy, and non-cyclical defensive balance sheets, while long-duration Growth (Tech, Discretionary) underwent severe derating and equity market dispersion expanded.
EQUITIES MOST SENSITIVE TO FEDFUNDS STOCK BETA
| TICKER | LAST | % CHG | CORR (r) |
|---|---|---|---|
| GOOGL Communication Services | $279.84 | -1.40% | -0.24 |
| AMZN Consumer Discretionary | $240.35 | -1.41% | -0.19 |
| GS Financials | $894.55 | -3.58% | -0.68 |
| XOM Energy | $187.25 | +2.16% | + 0.60 |
| JPM Financials | $337.04 | -1.90% | -0.59 |
| AVGO Technology | $326.08 | -5.48% | -0.51 |
| AAPL Technology | $344.63 | -1.23% | -0.48 |
| NVDA Technology | $204.64 | -4.22% | -0.47 |
| CAT Industrials | $622.75 | -3.81% | -0.45 |
| NFLX Communication Services | $62.08 | +0.05% | -0.43 |