Michelle M. from Redding, CA asks: Hello Mitch, I know everyone expected the Federal Reserve to raise interest rates again last week. I\u2019m curious if you think they\u2019re done and whether you think rates and the economy are \u201clanding\u201d in the right place. Thank you!<\/p>\n\n\n\n
Mitch\u2019s Response:<\/p>\n\n\n\n
The Federal Reserve indeed wrapped up their two-day meeting last week with another 25-basis point rate increase, which pushed the benchmark fed funds rate to a 22-year high. The Fed has hiked rates 11 times since March 2022, with the benchmark rate now sitting at a range between 5.25% and 5.5%.1<\/p>\n\n\n\n
I don\u2019t think it\u2019s possible to know at this stage whether or not the Fed is done. In his remarks following last week\u2019s Fed meeting, Chairman Powell said it was too soon to tell whether the economy and inflation would cool enough in the coming quarters to warrant ending the rate hike campaign. So, if you want to predict whether rate hikes are over, you\u2019d also need to be able to predict where inflation will be in September. It isn\u2019t possible to know for sure.<\/p>\n\n\n\n
What Rising Interest Rates Mean for Your Investment Portfolio?<\/a><\/strong><\/em><\/p>\n\n\n\n Much attention is given to the Federal Reserve\u2019s policy decisions, and for good reason \u2013 interest rates affect financials for consumers and businesses. But, are you aware that there are ways to safeguard your investments amidst uncertain times?<\/p>\n\n\n\n I recommend that investors download our exclusive guide, The Federal Reserve is Rising Rates, What Does This Mean for Stocks?<\/a><\/strong><\/em> This guide puts the current environment in the context of the past 70 years. You\u2019ll also get insight on: If you have $500,000 or more to invest, download our free guide, The Federal Reserve is Raising Rates. What Does This Mean for Stocks?2\u2019<\/sup><\/a><\/em><\/strong> today!<\/p>\n\n\n\n We did see some very positive news on Friday of last week, however, with the release of the Federal Reserve\u2019s preferred inflation gauge, the personal consumption expenditures (PCE) price index. The Commerce Department reported that the PCE price index rose 3% in July from a year ago, which was down substantially from May\u2019s 3.8% pace. The Core PCE price index, which matters more to the Fed since it excludes volatile food and energy categories, eased to 4.1% year-over-year in July from 4.6% in May. 4.1% inflation is still double the Fed\u2019s 2% target, but the declining trend looks promising.<\/p>\n\n\n\n The Fed\u2019s next meeting is in September, which means July\u2019s PCE price data will be meaningful to the Fed\u2019s next move. That data gets released in late August. From the market\u2019s perspective, however, I\u2019m not sure that another 25 basis point increase matters all that much. Higher rates can crimp the value of forward earnings, of course, but at this stage, the market has likely already priced in the possibility of the terminal rate landing somewhere between 5% and 6%. In other words, there would not be much surprise power for corporations or markets if the Fed hiked again.<\/p>\n\n\n\n It may be that inflation continues in a downtrend next month, then the Fed may pause in September and wait until November or December to make an additional increase if they do at all. There is also the possibility that economic growth continues to moderate between now and then, which would put some pressure on labor markets and also the employer cost index, which is an underlying force influencing inflation. That would be another reason for the Fed to hold off.<\/p>\n\n\n\n Chairman Jerome Powell seemed to leave the door open for all possibilities in his comments following the last meeting when he said \u201cWe have to be ready to follow the data, and given how far we\u2019ve come, we can afford to be a little patient, as well as resolute, as we let this unfold.\u201d<\/p>\n\n\n\n As we let this unfold more, I recommend reading our new guide that covers the history of the Fed raising rates to better help you with your financial planning.<\/p>\n\n\n\n You\u2019ll get insight on: If you have $500,000 or more to invest, download our free guide, The Federal Reserve is Raising Rates. What Does This Mean for Stocks?<\/a>3\u2019<\/a><\/sup><\/em><\/strong> today!<\/p>\n","protected":false},"excerpt":{"rendered":" Mitch discusses the Fed’s recent rate hike, the latest inflation data, and whether there will be additional rate increases. <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-12610","post","type-post","status-publish","format-standard","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12610","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=12610"}],"version-history":[{"count":3,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12610\/revisions"}],"predecessor-version":[{"id":12615,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12610\/revisions\/12615"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=12610"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=12610"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=12610"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\u2022 How stocks have performed historically during rising interest rates
\u2022 A brief history of Fed rate hike campaigns, and why they mattered
\u2022 Plus, more information and context to help make sense of the current environment so you can respond appropriately
<\/p>\n\n\n\n
\u2022 How stocks have performed historically during rising interest rates
\u2022 A brief history of Fed rate hike campaigns, and why they mattered
\u2022 Plus, more information and context to help make sense of the current environment so you can respond appropriately
<\/p>\n\n\n\n