Let’s be honest with ourselves.
Investors have jumped the gun SEVERAL times assuming the Fed was about to cut rates. Heck, even going back to late 2023 the majority of investors predicted rate cuts would soon be in hand only to find out that inflation was still too hot and Fed officials were right to be more patient.
Gladly it seems that the Fed and investors are finally on the same page with rate cuts likely to be in hand at the September 18th meeting. Let’s dig in on the specifics and what that means for our trading plan in the weeks and months ahead.
Market Commentary
For the past several weeks investors became quite confident that rate cuts would soon be on the way. First, because the rate of inflation is falling faster than expected and not far off the Fed’s 2% target. Second, because the economy is showing signs of weakness.
The solution for both of these things is lower rates. That is why investors are now at 100% certainty of rate cuts coming at the next Fed meeting on September 18th.
This level of confidence tells you why investors quickly erased the early August correction that had the S&P 500 (SPY) down 10% at 5,119. Now we are ever closer to the all time 5,669.
Helping the bullish cause was the release of the Fed minutes on Wednesday of this week. Here is the key phrase that helped boost stocks once again:
“The vast majority” of participants at the July 30-31 meeting “observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting”
Just for clarity, the Fed minutes will never say “Oh yeah...we are definitely going to lower rates at the next meeting.”
Instead, they talk in somewhat veiled language that leans in a certain direction, but gives them the ability to back track if need be.
The key thing to remember is some of the previous statements by Powell. He made it clear the Fed does not need to wait for inflation to be down to 2% before lowering the Fed Funds rate. That is because there is a lagged effect in their policy of about 6+ months. Thus, when they see that inflation is on a path towards their 2% target it is time to start lowering rates or risk harming the economy.
Harming the economy translates to people losing their jobs. Yet as we are reminded ALL THE TIME by the Fed, they have a dual mandate. Keep prices in check (2% inflation target) and promote full employment.
That latter part is starting to show some cracks as the unemployment rate has risen to 4.3%. That is still pretty low in the grand scheme of things...but a notable increase from the 3.4% unemployment rate when they started raising rates.
Now is the right time to lower rates to produce a soft landing. The end result should be increased GDP growth in 2025 which begets higher earnings growth which begets higher stock prices.
The investing game plan of what comes next is best spelled out in the webinar I held last week which was focused on the post 9/18 rate cut landscape.
What To Do Next?
Discover my current portfolio of 11 stocks packed to the brim with the outperforming benefits found in our exclusive POWR Ratings model. (Nearly 4X better than the S&P 500 going back to 1999).
All of these hand selected picks are all based on my 44 years of investing experience seeing bull markets...bear markets...and everything between.
And right now this portfolio is beating the stuffing out of the market.
If you are curious to learn more, and want to see my 11 timely stock recommendations, then please click the link below to get started now.
Steve Reitmeister’s Trading Plan & Top 11 Stocks >
Wishing you a world of investment success!
SPY shares were trading at $562.14 per share on Friday morning, up $5.92 (+1.06%). Year-to-date, SPY has gained 19.02%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
How Will Stocks React to Lower Rates? StockNews.com
