The Federal Reserve slashed its key lending rate, the fed funds rate, by 0.25% to a range of 1.75-2.00%. The decision came as no surprise, but the result highlighted the divisions within the Fed. The final vote: seven in favor of the cut, two preferred keeping rates unchanged, and one voted for a 0.50% reduction.
In its statement, the Fed touted several of today’s economic positives, including “strong” consumer spending, “solid” job gains, and a “moderate” rate of economic growth. But it also acknowledged that business spending has been soft, and exports have “weakened.”
Or is it?
Policymakers have fretted over a major attack on Saudi Arabia’s oil fields for decades. It finally happened on Saturday, with an attack knocking out 5.7 million barrels/day of production, or almost 6% of the world’s daily supply (WSJ).
- Lost production may be fully restored within two to three weeks, Reuters reported on Tuesday. Other reports suggest it could be longer.
Is it really a big deal? Well, yes and no.
Over the medium and longer term, the fundamentals are the key drivers of stock prices. These drivers include economic growth, corporate profits, interest rates and bond yields, and the level of inflation.
October has a gloomy reputation.
- The 1929 market crash and the 1987 market crash were in October.
- During the 2008 financial crisis, stocks were badly beaten up in the month that sports Halloween.
Yet, since 1970, the worst performing month for the S&P 500 Index2 has been September, per St. Louis Federal Reserve data.