The Only Thing The Market Really Cares About
There is always tremendous debate on what makes stocks move, in addition to countless economic indicators, it is enough to make your head spin. Or, is the average individual investor correct by blaming the frequent negative headlines. Which one is it?
My crystal ball must be working because the one thing that really matters is clear as day: whether or not the Federal Reserve lowers interest rates.
That’s it. That’s all she wrote. That’s the big Kahuna. The Fed meets next week. If they do what Wall Street expects and they give dovish guidance on interest rates – signaling that they expect to lower rates sometime soon – the market will pop.
Many expect the Fed to lower rates in their next meeting. I don’t see them taking action just yet, probably in September. I simply expect (hope) them to change their tune and imply that they are ready to lower rates if weak data were to justify it. That will be enough.
If, on the other hand, they don’t give any indications that they stand ready to act, then stocks will drop like a rock.
The market will view this (unlikely) action as an indication that they are out of touch….again….much like their bonehead move in December when Fed Chairman Powell announced during his December policy speech saying that they expected to raise rates next year. The S&P 500 was down about 12% already and when he said that, it fell another 10% in just a few days.
So once again all eyes are on the Fed.
We’re back to “Fed Watch”. The Fed hasn’t lowered rates in almost a decade. The good news is that the US economy is strong, a very different scenario than the last time rates rose. In addition, inflation remains very low which should clear the way.
The old adage, “Don’t fight the Fed” is a great piece of advice. Although, stocks should react very well to this news, the risks are rising. Younger investors can look at this as risk on.
Older investors, those in retirement or close, need to take a different approach by being properly invested “Tactically”. Never buy-and-hold (buy-and-hope) and with an asset protection firmly in place, before venturing into the dangerous waters. The very things we help our clients with every day.
If you think you could use a little help with a free 2nd opinion of your portfolio and/or overall Retirement Master Plan and a forward-looking tax-strategy, just give us a call.
“Invest for need, not for greed!”™
Cheers –Keith Springer