The much-anticipated Fed cut finally came, marking the first time the Federal Reserve cut rates since around the onset of COVID. As a reminder, it wasn’t long ago that the Fed hiked rates 11 times just in a span of 16 months. And while the Fed’s ½ point cut wasn’t a surprise (with 65% of the futures market expecting it), the size of it does make you wonder whether they’re making up for perhaps being late to the party. With two more meetings for the Fed this year, so are talks of yet another 1-2 cuts before year end. One interesting thing is that the Fed’s next meeting is scheduled for the same week as the presidential election, in fact, just a day after the election. So, I’m smiling as I’m typing this because the Fed has maintained that they’re non-politically motivated. We’ll see. What do you think?
As expected, the markets rallied soon after the Fed’s move. For those unfamiliar, lower rates are generally a good thing for the markets as this can help bolster economic activity by lowering the cost of borrowing for individuals and for companies. Higher corporate earnings can also help improve employment rates.
So, the real question is what’s really behind the move? Was it because the Fed has successfully tamed the inflation monster and now we’re in an ‘easing’ cycle? Or was related to concerns around a potential recession? We don’t really know.
Now that the Fed has cut rates, what does this all mean to us? The answer is it was an event. They did what most people expected them to do. Was it a good thing? I think so for the reasons I mentioned above. Ultimately, earnings will drive the market.
Since the stock market is one of the best economic indicators, which often prices in advance events like rate cuts, we’ll take its lead as to whether we go defensive in our strategies or stay fully invested. Right now, the market is acting in a typical Bull market behavior. This is the benefit of having a tactical strategy over your accounts, so we can take the guess work out and help ease your concerns. For now, we’re staying the course until the market tells us otherwise.
As always, we’re just an email or call way if you want to talk or do a review. You can reach Chad Albano and the team at Global View Capital Advisors by scheduling an appointment here: https://app.acuityscheduling.com/schedule/7c4635ff
