{"id":12939,"date":"2024-01-10T17:23:09","date_gmt":"2024-01-10T17:23:09","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=12939"},"modified":"2024-01-10T17:24:48","modified_gmt":"2024-01-10T17:24:48","slug":"what-potential-fed-rate-cuts-could-mean-for-investors","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/what-potential-fed-rate-cuts-could-mean-for-investors\/","title":{"rendered":"What Potential Fed Rate Cuts Could Mean for Investors"},"content":{"rendered":"\n<p><em>Lana B. from Florence, AL asks: <\/em>Hello Mitch, I\u2019ve been reading everywhere that the Federal Reserve is expected to lower interest rates a few times this year. Are there any smart money moves you\u2019d recommend in anticipation of these rate cuts? Thank you and Happy New Year!<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thanks for emailing me, Lana! You\u2019re asking a great question.<\/p>\n\n\n\n<p>Indeed, in the Federal Open Market Committee\u2019s (FOMC) December meeting, we learned that the Fed is projecting their benchmark Fed funds rate would end this year in a range between 4.5% to 4.75%. Since rates are currently at 5.25% to 5.5%, the implication is that Fed funds would fall by 75 basis points, which could mean three rate cuts throughout the year. Assets across capital markets seemed to welcome this news warmly, as both stocks and bonds rallied in December.<sup>1<\/sup><\/p>\n\n\n\n<p>As I\u2019ve written before, I\u2019m reluctant to offer you any specific advice without knowing your financial situation, risk tolerance, and growth\/income objectives specifically. But what I can do is offer more general ideas about money moves in an environment where the Fed is cutting rates.<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=website&amp;medium=blog&amp;term=mitchsmailbox_blog_2024_01_11content=volatility_guide\"><span style=\"text-decoration: underline;\">How Can You Manage Market Volatility?\u00a0<\/span><\/a><\/strong><\/p>\n\n\n\n<p>During periods of uncertainty, many investors may be tempted to sell stocks in an attempt to safeguard against potential losses. However, selling during times of high volatility often cements losses, as market changes are unpredictable and can rebound later.<\/p>\n\n\n\n<p>In this market, I suggest developing a mental approach for dealing with volatility. Our guide, \u201c<strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=website&amp;medium=blog&amp;term=mitchsmailbox_blog_2024_01_11content=volatility_guide\"><span style=\"text-decoration: underline;\">Helping You Manage Market Volatility<\/span><\/a><\/u><\/em><\/strong>,\u201d provides insights and tips to do just that. Get answers to questions like:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><em>Market downturns can and will occur, but what should you do?<\/em><\/li>\n\n\n\n<li><em>How can diversification help you manage volatility without compromising your returns?<\/em><\/li>\n\n\n\n<li><em>When volatility is too much for you to handle, how can a money manager help?<\/em><\/li>\n\n\n\n<li><em>Can volatility actually be an opportunity?<\/em><\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to get answers to the questions above, click on the link below to download this guide today!<br>\u00a0<br><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=website&amp;medium=blog&amp;term=mitchsmailbox_blog_2024_01_11content=volatility_guide\"><span style=\"text-decoration: underline;\">Download Zacks Volatility Guide, \u201cHelping You Manage Market Volatility.\u201d<sup>2<\/sup><\/span><\/a><\/strong><\/p>\n\n\n\n<p>Let\u2019s start with cash and cash-like instruments, like CDs, money market funds, and high-yield savings accounts. As many readers know, yields on these accounts and instruments rose across the board in 2023, with many risk-free or low-risk securities paying ~5% annually on cash. For older folks or those in retirement, this development marked a sharp contrast to what many experienced in the past decade.<\/p>\n\n\n\n<p>With the possibility of rate cuts in 2024, I think it\u2019s quite possible that the yield on CDs and high-yield savings accounts could come down, so it might make sense for investors to consider locking in these high rates now. I generally recommend that people keep about one year\u2019s worth of income needs in cash, as a form of emergency savings. An idea would be to keep six months\u2019 worth of cash in a high-yield savings account, and 6-months\u2019 worth of cash in a short-term CD. Rates on both of these instruments are attractive at the moment, relatively speaking.<\/p>\n\n\n\n<p>The fixed-income market may also present some opportunities, on the shorter end of the curve. It\u2019s possible that rate cuts could ease pressure on Treasury bond yields, and holders of those bonds would benefit not only from the coupon but also from rising bond prices in the event of falling rates. In a diversified portfolio, where fixed income is used for income and to reduce volatility, I think 2024 could prove a nicely positive year.<\/p>\n\n\n\n<p>In terms of stocks, falling interest rates reduce the discount rate on future cash flows, which may factor as a tailwind for growth-oriented stocks, like technology names. Lower interest rates also help businesses by reducing borrowing rates, which can increase investment activity and help drive future growth. Every investor\u2019s exposure to stocks depends on their growth objectives and risk tolerance, but falling rates generally speaking tend to be good for stocks, not bad.<\/p>\n\n\n\n<p>To prepare for what\u2019s to come, I recommend that investors develop a mental approach to dealing with volatility and market changes.<br>&nbsp;<br>Our Volatility guide, \u201c<strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=website&amp;medium=blog&amp;term=mitchsmailbox_blog_2024_01_11content=volatility_guide\">Helping You Manage Market Volatility<sup>3<\/sup><\/a><\/u><\/em><\/strong>,\u201d&nbsp;will provide you with insights and tips to do just that. Get answers to questions like:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Market downturns can and will occur, but what should you do?<\/li>\n\n\n\n<li>How can diversification help you manage volatility without compromising your returns?<\/li>\n\n\n\n<li>When volatility is too much for you to handle, how can a money manager help?<\/li>\n\n\n\n<li>Can volatility actually be an opportunity?<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to get answers to the questions above, click on the link below to download this guide today!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Fed is signaling rate cuts this year. Mitch discusses how investors can prepare to take advantage of these moves<\/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-12939","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\/12939","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=12939"}],"version-history":[{"count":3,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12939\/revisions"}],"predecessor-version":[{"id":12942,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/12939\/revisions\/12942"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=12939"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=12939"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=12939"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}