Welcome to our September 2024 Viewpoints, a monthly bulletin from PDS Planning to our valued clients and friends. Our goal with each issue of Viewpoints is to provide you with a wide variety of perspectives on life and wealth. Feel free to share with others.
By Drew Potosky, CFP®,
Posted: 9/19/2024
Staying Invested – Election Year Edition
We’re less than two months away from the Presidential election and, though rates and unemployment have been taking the spotlight, volatility from election uncertainty is still here. What does this mean for investors? Nothing, really. Markets don’t care if Harris or Trump get elected. Strictly from an investment markets lens, it doesn’t matter who is elected. The important takeaway is staying invested. Look at the charts below from BlackRock’s Student of the Market. On the left is what would have happened to $100,000 invested as of 12/31/2013 under three scenarios. The yellow line is only if the dollars were invested when a Republican President was in office and a red line is invested only during a Democratic President. The green line (that grows into a larger balance) is what would have happened if the cash stayed invested the whole time. The chart on the right side is the same but looks back 70 years. No question, staying invested through it all is what matters.
Fed Cut Rates 0.50%
Fed Chair Jerome Powell and most of the Federal Open Market Committee agreed to a 50 basis point (0.50%) rate cut yesterday, September 18th. The initial market reaction was a rollercoaster of, ‘this is good’ followed by ‘wait, no, this is bad’ and back and forth some more. It took overnight and into the morning for investors to digest the remarks from Powell and get on the same page. Markets opened largely positive on the 19th. The S&P about 1.50% higher. My interpretation of the initial seesawing was due to investors trying to guess why there was a 50 basis point cut. Was it because inflation has come down enough to support this, or is the Fed more worried about the state of the economy than we thought? In comments post-cut Reuters writes, “Fed boss Jerome Powell described Wednesday’s outsize half-point interest rate cut as a ‘recalibration’ rather than some panicky emergency, and investors are taking the move as a sign the Fed will seek that new ‘neutral’ quickly without necessarily being forced into it by a weakening economy.” I wrote about markets being forward-looking in the September Market Commentary and this is a great example. Once investors better understood the comments and had a clearer view of their perceived future, markets were able to react accordingly. The FOMC and markets expect another 0.50% reduction by the end of the year, most likely in the form of two 0.25% reductions. The fun thing about the future, though, is that we won’t know until we know!
Mortgage Rates are Trending Down
As the Fed Funds rate starts to come down, so too should interest rates around different markets. Mortgage rates have been in decline since May of this year and, with the median interest rate projections coming in still lower, may well continue this trend. Early Wednesday (the 18th) morning, the economic data for Mortgage applications was printed, showing an increase of 14.2% since last week. Week to week data has a tendency to tell us little with it being so short-term. However, this is the 6th week in the last 7 in which Mortgage applications have shown growth, and in conjunction with housing starts and building permits exceeding August expectations, could be pointing to the potential of a strong housing market as rates continue downward.
America’s Top Universities
The New England area takes the cake with 9 of the top 25 schools!
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