๐๐ก๐๐ญ ๐๐ฌ ๐ญ๐ก๐ ๐๐ฎ๐๐ฌ๐ญ๐ข๐จ๐ง.
The Federal Reserve is on the brink of making a significant policy shift. With interest rates at their highest level in over a decade, a rate cut is widely anticipated at the upcoming meeting. This marks a significant turning point for the US economy and global financial markets.
๐ ๐๐โ๐ฌ ๐ ๐ข๐ซ๐ฌ๐ญ ๐๐๐ญ๐ ๐๐ฎ๐ญ ๐ข๐ง ๐ ๐๐๐๐ซ๐ฌ: The Federal Reserve is expected to lower interest rates for the first time since 2019, with a cut widely anticipated at Wednesdayโs meeting.
๐๐ก๐ ๐๐ข๐ ๐๐ฎ๐๐ฌ๐ญ๐ข๐จ๐งโ๐๐๐๐ฉ๐ฌ ๐จ๐ซ ๐๐๐๐ฉ๐ฌ?: Markets are currently giving a 67% chance of a 50bps cut, having had a larger probability of 0.25% heading into the weekend.
๐๐ก๐ฒ ๐ญ๐ก๐ ๐๐ก๐๐ง๐ ๐ ๐ข๐ง ๐๐๐ง๐ญ๐ข๐ฆ๐๐ง๐ญ?: Economic concerns are rising. Some officials believe the current high rates (5.25%-5.5%) are slowing growth too much, prompting calls for a bigger cut to stimulate the economy.
๐๐จ๐ฅ๐ข๐ญ๐ข๐๐๐ฅ ๐๐ซ๐๐ฌ๐ฌ๐ฎ๐ซ๐: The Fedโs decision comes just ahead of the November presidential election, which adds another layer of complexity. While Trump warns against any cuts before the election, Democratic Senator Elizabeth Warren is pushing for a more aggressive 75bps cut.
๐๐จ๐๐ญ ๐๐๐ง๐๐ข๐ง๐ ๐จ๐ซ ๐๐ฎ๐ซ๐๐ฎ๐ฅ๐๐ง๐๐ ๐๐ก๐๐๐?: The Fed aims for a rare soft landing for the US economy, but some experts are concerned that cutting too aggressively could increase volatility, especially with core inflation still elevated in sectors like housing. It could also signal to the market that trouble is coming.
๐๐๐ซ๐ค๐๐ญ ๐๐๐ฉ๐ซ๐ข๐๐ข๐ง๐ ๐๐ง๐๐๐ซ๐ฐ๐๐ฒ: A rate cut could set off a wave of repricing across trillions of dollars in global assets, already being reflected in rising stock prices and easing mortgage rates.
As the Federal Reserve prepares to lower interest rates, it’s crucial to understand the potential market implications. While rate cuts are often seen as economic stimulants, short-term volatility can be expected. Historically, rate cuts have signaled underlying economic concerns, leading to market fluctuations. Investors may see increased market swings as assets are repriced.
It’s important to remember that rate cuts don’t always guarantee immediate stock market gains. The economic factors behind these cuts, such as slowing growth or recession risks, can create cautious investor sentiment. This caution may result in temporary stock price declines as markets adjust. Bond yields may also shift, reflecting changing inflation and growth expectations.
Despite the potential for short-term turbulence, our focus remains on maintaining a diversified, long-term investment strategy. We continue to maintain an optimistic long-term outlook as the rate cuts are priced in. We’ll closely monitor the situation and make necessary tactical adjustments to your portfolio. Staying disciplined and committed to your long-term goals is crucial during uncertain times.
Stay tuned as we await the Fed’s decision.
Informationย courtesy of John Haslett from Graphite Asset Advisory and interpreted by RockWealth Capital.
