Three and Done – October 30, 2019

The Federal Reserve concludes its two-day meeting on Wednesday. There is a 97% chance of a ¼% reduction in the fed funds rate to 1.50-1.75%, according to the CME group.

• The Fed is unlikely to upend expectations. Expect a rate cut.

It will be the third reduction since July. But is this the last cut in the cycle—three and done?

Powell’s ‘mid-cycle’ policy adjustment

Attempting to front-run the Fed is dicey. But let’s give it a shot.

Fed Chief Powell is fond of talking about the 1995 and 1998 rate cuts.

• In both cases, there were three rate reductions.

Powell may argue that three rate cuts act as an insurance policy, helping to inoculate the economy against international headwinds.

More likely than not, Powell may hint the Fed is finished cutting rates this year but will leave enough wiggle room in the event the economic data is unexpectedly soft, or trade tensions escalate again.

Investor’s corner

As investors digest a Fed download, it’s not unusual to see short-term volatility in the days after a Fed meeting.

While the economy has taken a backseat to trade tensions this year, the economic fundamentals drive equities longer term.

Our goal is to design a customized financial plan that not only takes individual circumstances into account, but one that incorporates the longer-term upward bias in stocks.

Created 2019-10-30 14:35:51