Baseball legend Yogi Berra famously said, “It ain’t over ‘til it’s over.” Fed Chairman Jerome Powell appears to have taken those words to heart in recent months.
Following the Fed’s June meeting, he said that “Inflation has eased over the past year but remains elevated.” In other words, “it ain’t over ‘til it’s over.” The Fed wants to see some more progress toward their 2% target inflation goal before considering any monetary policy changes.
You may recall that just a few months ago, the Fed seemed prepared to cut rates as many as three times in 2024. However, an uptick in inflation in Q1 forced them to revise their outlook and most Fed officials now anticipate cutting short-term interest rates just once this year.
The Fed’s about-face serves as a good lesson for all investors. Changes in your personal goals, time horizon, and risk tolerance should be what influence adjustments to your portfolio, not forecasted projections. The economy is everchanging and markets shift on a daily basis. The Federal Reserve will adjust its strategy in response to what’s happening.
When I advise my clients to “stay the course” and not overreact to headlines, it’s because I’ve experienced several economic cycles that have taken longer than originally expected to resolve. I’ve also seen other cycles conclude earlier than expected. So today, I ask myself, “Is the Fed going to stick to its one-cut strategy or update its approach at the next meeting?” Recent history would suggest it’s about a 50/50 chance!
At Concord, our strategy isn’t dependent on what the Fed does or doesn’t do, so let’s stay the course and remember, “It ain’t over ‘til it’s over.”
If have questions about the state of the economy or would like to revisit your financial plan, please don’t hesitate to reach out.