How Much Will The Fed Cut Rates?
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I’ve been in the markets report biz for quite some time now, long enough to see a decent number of Federal Reserve interest rate cycles. And perhaps there’s no way to quantify it, but from where I sit, this is probably the most anticipated rate cut in history.
After any number of false dawns, the Fed is widely expected to lower rates at this coming week’s meeting. This will be the first cut since the Fed started what would become its most aggressive series of rate hikes in its history in early 2022.
A critical variable here, of course, is good news on inflation. This past week, the Consumer Price Index came in a touch above expectations. But Morningstar’s chief US economist Preston Caldwell explains why the inflation trend is still heading in the right direction.
With inflation coming down and the jobs market softening, the open question is how much the Fed will cut rates. The bond market is leaning toward a modest quarter-point cut. But what if the Fed goes with a more aggressive half-point easing? What kind of signal will that send? Sarah Hansen looks at the scenarios.
The next question, of course, is what this will mean for the markets. We took a close look at what history tells us about how stocks respond when the Fed starts cutting rates. The takeaway: Be prepared.
Of course, with most investors holding portfolios that mix stocks and bonds, there’s more to the story than just how stocks respond. This can be seen in the performance of 60/40 stock and bond portfolios. Check out this video, in which Susan Dziubinski and Jason Kephart chat about what falling rates might mean for 60/40 portfolios.
Lastly, John Rekenthaler digs deep into the research on stock market history, wondering what the record shows when it comes to past performance predicting future returns. It’s a great read.
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