It's Not What You Do, It's What You Say

Typically, actions speak louder than words. However, this month, the reverse will hold true.

To provide context, the Federal Reserve will meet on July 31st and September 18th to announce its interest rate decisions.

The markets have almost fully priced in the expectation that the Fed will maintain interest rates on July 31st and implement a 0.25% rate cut on September 18th. Given the current predictions, it is highly unlikely that there will be any surprises, and markets will not highly be impacted as these outcomes are already anticipated.

Thus, the impact will stem less from what is done and more from what is said by Fed Chair Jerome Powell. His commentary will shape market perceptions of the Fed’s stance on interest rates, inflation, and the economy over the next 12 months. If Powell’s language suggests that inflation is cooling and the economy needs support, it will indicate a more aggressive approach to rate cuts in the coming year. Conversely, if the language does not suggest this, we can expect a different approach. As industry professionals, we closely analyze such indications for potential changes in interest rates and their market impacts.

It’s worth noting that the Federal Reserve’s interest rate is already at 5.25-5.50%*, which puts us in a strong position. This allows the Fed to significantly support the economy through rate reductions whenever needed.

As Warren Buffet wisely advises, “The stock market is designed to transfer money from the impatient to the patient.”* Staying invested, even during times of uncertainty, is the best course of action.