{"id":13468,"date":"2024-10-16T18:36:50","date_gmt":"2024-10-16T18:36:50","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=13468"},"modified":"2024-10-16T18:36:51","modified_gmt":"2024-10-16T18:36:51","slug":"did-the-fed-cut-rates-too-soon","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/did-the-fed-cut-rates-too-soon\/","title":{"rendered":"Did The Fed Cut Rates Too Soon?"},"content":{"rendered":"\n<p><em>Barbara J. from Oxford, MS asks: <\/em>Hello Mitch, I read in a few different places that the September inflation numbers were higher than expected. Do you see this as a potential sign that the Federal Reserve acted prematurely, and do you think it could be volatile for the stock market? I am certainly not feeling any signs of improving inflation in my pocketbook. Thank you.<\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thank you for emailing, Barbara. Let\u2019s first cover the September inflation report and then I\u2019ll dive into comments about the Federal Reserve and markets.<\/p>\n\n\n\n<p>In your question, I believe you\u2019re referring to the September consumer price index (CPI), which showed headline inflation ticking slightly lower from 2.5% year-over-year in August to 2.4% in September. The \u2018higher-than-expected\u2019 part of the report you\u2019re referring to is for Core prices, which accelerated by 0.1% in September to 3.3% year-over-year. Both readings were slightly worse than the market was expecting.<sup>1<\/sup><\/p>\n\n\n\n<p>The inflation metric the Fed watches more closely, the headline personal consumption expenditures (PCE) price index, registered at 2.2% year-over-year in August, a solid improvement from July\u2019s 2.5% rate. We won\u2019t see September PCE inflation data until October 31.<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2024_10_17&amp;content=volatility_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2024_10_17&amp;content=volatility_guide\"><span style=\"text-decoration: underline;\">Expert Insights for Handling Market Volatility<\/span><\/a><\/strong><\/p>\n\n\n\n<p>In volatile markets, it\u2019s common for investors to react impulsively.<\/p>\n\n\n\n<p>A more effective approach than resisting volatility is learning how to navigate it. By taking steps to manage its effects, you can set yourself up for better long-term outcomes. To guide you through this, I\u2019m offering a free resource\u2014\u2018<a href=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2024_10_17&amp;content=volatility_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2024_10_17&amp;content=volatility_guide\"><strong><em><u>Helping You Manage Market Volatility<sup>2<\/sup><\/u><\/em><\/strong>.<\/a>\u2019<\/p>\n\n\n\n<p>This guide provides you with expert insights on how to navigate market fluctuations effectively, including:<\/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\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2024_10_17&amp;content=volatility_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2024_10_17&amp;content=volatility_guide\"><span style=\"text-decoration: underline;\">Download Zacks Volatility Guide, \u201cHelping You Manage Market Volatility.\u201d<sup>\u00a02<\/sup><\/span><\/a><\/strong><\/p>\n\n\n\n<p>Looking at these two sets of inflation data together, I don\u2019t see much cause for concern, and I certainly do not think the data presents anything new for markets. Equity markets, in my view, have likely moved past the inflation story at this stage and are more focused on economic growth and earnings.<\/p>\n\n\n\n<p>Unless we see a sudden and dramatic re-acceleration in inflation \u2013 which we\u2019re not anticipating \u2013 the Fed should be able to continue along a path of moderate rate cuts at least for the balance of the year. From a historical perspective, the average annual CPI inflation rate is approximately 3%, which puts current inflation well within norms \u2013 even if it is slightly higher than the Fed\u2019s 2% target.<\/p>\n\n\n\n<p>As far as still feeling inflation as a pocketbook issue, it\u2019s important to remember that inflation is a measure of the rate of change in consumer prices. In other words, the CPI and other inflation data do not tell us about where prices are, but rather <em>at what rate they\u2019re changing. <\/em>Apart from food and energy prices\u2014which are volatile over time\u2014we do not necessarily want to see prices declining. That\u2019s deflation, and it\u2019s typically a sign of economic weakness. Consider that slightly rising prices over time are what motivate businesses to keep producing more goods and supplying more services, so some level of inflation is actually healthy for a growing economy.<\/p>\n\n\n\n<p>What we don\u2019t want to see is inflation rising faster than wages over time, which was what was so painful about 2022. It\u2019s also why consumers are still frustrated with prices overall. The good news is that cost-of-living-adjustments in Social Security Retirement Benefits are designed to keep pace with inflation, and wages have been rising faster than inflation in the past couple of years. It will take some time for some consumers to feel like their purchasing power has returned to pre-pandemic levels, and I understand that the pain of inflation is still being felt. But if the economy continues on a healthy path of growth from here, while inflation remains modest, I believe that \u2018normalcy\u2019 will return in time.<\/p>\n\n\n\n<p>While the road to \u2018normalcy\u2019 may take some time, investors don\u2019t have to wait to take control. Our free guide, \u201c<strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2024_10_17&amp;content=volatility_guide\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-volatility-guide?source=zim&amp;medium=blog&amp;term=mitchsmailbox_zim_2024_10_17&amp;content=volatility_guide\">Helping You Manage Market Volatility<sup>3<\/sup><\/a><\/u><\/em><\/strong>,\u201d is packed with expert advice to help you navigate uncertainty and keep your investments on course. Inside, you\u2019ll discover answers to pressing 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\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Mitch looks at the latest inflation report and what it means for the economy\u2014including consumer prices in the months ahead. <\/p>\n","protected":false},"author":3,"featured_media":13469,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-13468","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13468","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=13468"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13468\/revisions"}],"predecessor-version":[{"id":13470,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13468\/revisions\/13470"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media\/13469"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=13468"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=13468"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=13468"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}