Market Swings With Eyes on Fed Pivot

Will the Fed actually pivot??

That’s the question markets have been intensely debating this week, with no clear answer.?

Some background: The Federal Reserve has been raising interest rates this year to help curb surging inflation. It’s had the unfortunate side effect of sending the stock market lower, as traders worry such moves could tip the US economy into a recession.?

In fact, the S&P 500 posted a 25% decline in nine months, its third-worst performance at that point of a year since 1931.?

But then this week, data showed US job openings in August plummeted the most since early in the pandemic, leading to speculation the Fed might “pivot” from its path of sharp interest rate hikes. Stocks posted their best two-day rally since April 2020, which then fizzled on Wednesday after US companies added more jobs in September than expected.?

It’s enough to give even the most seasoned traders whiplash.?

What everyone is wondering now is how the Fed will react. Two Fed officials said on Tuesday that the central bank will continue raising rates, even after three straight 75-basis point hikes.?

Yet some data is showing the hikes are cooling down the economy, meaning future monetary policy might not need to be so aggressive.

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?— Claire Ballentine?

Wealthscore

For those trying to gauge where they stand financially, we recently launched WealthScore, a tool that allows users to get a financial health checkup by answering questions about their age, household size, income, spending, debt and assets. For the next few weeks, we’ll be sharing tips that correspond with the seven personal finance benchmarks measured by the tool. Here’s out latest, on how to prepare for retirement:

Tally up retirement savings With defined-benefit pension plans that guaranteed an income for life largely a thing of the past and Social Security’s finances looking shaky, the burden of saving for retirement is on employees’ shoulders. If you have a 401(k) and an employer that matches contributions up to a point, try to put in at least enough to get that match. If you have extra cash flow and are 50 or older, you can contribute an extra $6,500 pre-tax into your 401(k) on top of the $20,500 that’s the cap for everyone else; those with an IRA can contribute another $1,000 on top of the $6,000 limit in 2022. It’s also smart to have savings funded with after-tax dollars to better manage your tax bracket in retirement.

Wondering about your financial fitness? Use Bloomberg's WealthScore to see how you shape up.

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