Friends,
As most of you know, the Federal Reserve cut its key interest rate, the Fed Funds rate, by 50 basis points (½ %) last week. The Fed is attempting to normalize rates over time while negotiating a “soft landing” for the economy amidst a softening labor market and what appears to be a slightly softening economy.
What’s next? Cash yields and short-term interest rates are expected to drop, potentially forcing investors to rethink their strategy and options for investing excess cash. 5% yields on money markets and CDs are likely to be in the rearview mirror before long. It’s not as clear as to the short-term impact on key interest rates that affect most consumers (auto loans, mortgage loans, etc.). We would expect those rates to tick down over the next several months but keep in mind that the Fed does not set those rates: the market does. As we’ve been saying for some time, declining interest rates do provide a positive backdrop for both stocks and bonds for the long-term investor, however; there’s no guarantee as to what happens in the short term.
As usual, we are reviewing all of our client portfolios to make sure that we’re positioned properly for the environment we’re in. Let us know if you have any questions or if we can do anything for you.
Matt and Andrew