Are rate cuts on the horizon?

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As the market has been more or less buoyant this year, investors are asking, “Is it smooth sailing yet?” We are not out of the woods despite many positive signs. Here are the economic developments that may be coming into play in the next months.

  • Rate cuts are likely on the horizon, with the Fed confirming their intentions to cut rates three times this year. However, rates remain high by historical standards, in the 5.25% to 5.5% range. A rate cut is expected within the next three months.
  • Looser monetary policy usually stimulates economic growth; but on the slip side, it can also cause inflation. This does not seem to be a concern for the Fed Chairman, Jerome Powell, who believes that inflation will continue to decline. The Fed has a delicate balancing act to maintain. Cutting rates too early may cause inflation to resurge.
  • While the stock market has been on a slow but steady rise so far this year, bonds have been volatile. We would likely see more unsteadiness in the mid future as the Fed enacts its rate changes.

Policymaker actions are entirely hypothetical until they happen. The best way to position yourself to withstand any economic changes is an updated financial plan and a portfolio that is managed in accordance with your true risk tolerance. If you would like to discuss, please reach out.

-Judd

Sources

Blancato, Philip. Osaic. Market View Weekly. March 22, 2024. 

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