“Investing is simple, but not easy.”
-Warren Buffett
Here’s what you need to know this week:
- Stocks reach new all-time highs after the Federal Reserve cuts interest rates
- Multiple Fed officials leave the door open for additional large rate cuts
“Fifty Bips”
Stocks rose to all-time highs last Thursday after the Federal Reserve announced the first interest rate cut since March of 2020. Investors were mildly surprised that the Federal Reserve opted to cut rates by fifty basis points (0.50%) as opposed to the more conservative option of 25 bps (pronounced “bips”). This was not entirely unexpected, the bond market had ascribed roughly equal odds of either a 25 or 50 bp cut heading into the decision, but many analysts believed the Fed would take a more cautious approach for the first cut of this cycle.
Federal Reserve Chairman Jerome Powell spoke shortly after the announcement and gave a cautiously optimistic outlook. Powell said that it is still too early to declare “mission accomplished” but said that “The US economy is in a good place, and our decision today is designed to keep it there”[1]. Additionally, the Federal Reserve’s Summary of Economic Projections (SEP) shows that the Federal Reserve anticipates cutting interest rates by another 25 bps in both November and December this year, and four more cuts in 2025[2].
Keeping Options Open
The S&P 500 and the Dow Jones are both hovering near all-time highs this week while the tech-heavy NASDAQ still lags about 3.5% below its own high-water mark. This is notable because the tech sector has led the stock market rally over the last two years; a rotation from tech into other sectors is usually a sign of a broadening bull market, and so far that seems to be the case.
A handful of Fed officials spoke at a Q&A this Monday, and all three of them expressed their openness to another 50 bp cut if the data calls for it[3]. The next key data points for the Fed will come this Friday in the Personal Consumption Expenditures (PCE) report.
Analysts expect annualized PCE to fall from 2.5% to 2.3%, putting inflation right in the middle of its historical range of 2.0-2.5%[4]. If inflation continues its decline, the Fed will almost certainly remain on their rate cutting path.
What Else
- Israel has ramped up their airstrikes against Hezbollah in southern Lebanon
- More than 45,000 union workers at ports along the US eastern coast are threatening a strike on October 1st if a deal is not struck with shipping companies
- China is enacting more stimulus measures to bolster its slumping economy
- Gold reached a new all-time high of $2,635/oz
- OU plays Auburn this Saturday at 2:30 PM on ABC
- OSU plays 23rd ranked Kansas State this Saturday at 11:00 AM on ESPN
What We’re Reading
How often do you think about bananas? Gabriel Sachter-Smith may be the world’s preeminent expert on the fruit: he has discovered more than 500 types of banana on a global search to document them all. Click below to read about his journey and to see pictures of strange and exotic bananas I bet you didn’t know existed:
What’s Happening Downtown
The West Village District is hosting Fourth Fridays this Friday, September 27th. This event runs from 5:30-10:00 PM and features discounts and deals from local restaurants and retailers, as well as live music, games, free dancing classes and more! Click below to learn more:
Written by: Kane Ogle, CFP®
Steve Beck, Amber Eduvigen, CFP®, Kane Ogle, CFP®, Cale Olbert, CFP®, Brett Valentine, Brandon Ingerson, Jenni Hess, Anne Boone
Sources: [1] PBS [2] Yahoo! Finance [3] Bloomberg [4] Yahoo! Finance