It Happened! The Fed Cut Rates & Increased Volatility

This week brought volatility to market performance we expected might happen. You can hear our thoughts for why we believed the Fed would cut rates. The Fed did announce a drop of rates by .25%. This was largely expected by the market as well and already priced into stocks.

If this was expected why has the market pulled back?

While a rate cut was expected by investors and analysts there was hope of a larger cut. Had the Fed dropped rates by .50% then we could have seen a rally. However, we have volatility because the Fed actually sounded like this rate cut was tough to make. The terms used in the Fed announcement for this being more of a “midcycle adjustment” rather than a necessary cut because of economic conditions has investors a bit less hopeful that we’ll get another cut. If the Fed didn’t believe this was a necessary cut warranted by trade issues and a slowing economy then it’s hard to believe they see a large need for more of a cut.

Is there hope ahead for investors if we don’t have further rate cuts?

Yes, even with this recent pullback there is still hope for investors! Even this small rate cut could ignite some economic growth. We’ve seen how historically a rate cut can spur on increased borrowing. In the 1990s we saw similar rate cuts by Fed Chair Alan Greenspan and it spurred the market and economy on higher.

We continue to watch for signs of anything that warrants changes ahead. This week’s rate drop brought relief to investors and businesses alike.

Wondering how this affects your investments? Schedule a call with Michelle and Steve to discuss your portfolio today.