Cloudy with a chance of meatballs seems about right. At least that’s the feeling we walked away with after listening to Federal Reserve Chairman speech post meeting this past week. The Federal Reserve Committee unanimously agreed to hold the federal funds rate steady at a range of 5.25% - 5.5% at the conclusion of its two-day meeting this past week, keeping things in line with where they have been since July. While this in itself is no real surprise, it’s always the post-meeting “posturing” that tends to raise angst with economists and pundits alike. What is of interest is that the committee’s general assessment of the economy was upgraded, which in many minds may keep the door slightly ajar for more increases in the future. “The process of getting inflation sustainably down to 2% has a long way to go,” Fed Chair Jerome Powell said in remarks at a news conference. He stressed that the central bank hasn’t made any decisions yet for its December meeting, saying that “The committee will always do what it thinks is appropriate at the time.” I think most of us welcome the news of an economy that continues to grow, but that will be watched closely as inflationary issues persist (mostly in our grocery stores from what I can tell).
Wall Street mostly celebrated the toned-down news from the Chairman with the markets rebounding some from the previous several weeks. More news from the jobs report on Friday illustrated the slight cooling we are starting to see in the marketplace. U.S. payrolls increased by 150,000 in October, less than the 170,000 expected. The unemployment rate also rose to 3.9%, the highest level seen since January 2022. The Fed uses wage data as one component of its inflation watch. The central bank has opted not to raise interest rates at its past two meetings despite inflation running well above its 2% target. Following Friday’s jobs data, markets further reduced the probability of a rate hike in December to just 10%, according to a CME Group gauge. I believe there are several more economic indicators coming in the weeks ahead that could possibly give the Fed enough of a reason to end this current rate hiking cycle.
My “meatball” reference in the opening sentence also refers to the continued verbal sparring taking place in Washington. With only a few short weeks left before the next chapter of the impending government shutdown occurs, the finger pointing and blame game is back on full display. The first measure of business by new House Leader Mike Johnson has been to secure additional funding for the continued situations in Israel and the Ukraine. The lines in the sand are being drawn between spending and budget cuts, with Speaker Johnson requiring an equal cut to the IRS’s budget in line with the aid being offered to Israel. This isn’t a new discussion by any means but it’s a battle that is being renewed with vigor by both sides of the aisle. What this is showing in my opinion is that the impending government shutdown will not go smoothly. In my view, we should expect that a disruption WILL take place, and the risks associated with this may be impactful to many individuals and families. The reality of the situation is that spending needs to be reeled in and we cannot continue to rely on the fiscal “printing press” to solve our issues. There is no question that this topic will be a headliner for the political debates we will witness in the new year. So much fun, right??!!!
The last few months have been challenging on many levels. From shopping at the grocery store, to reading the depressing global headlines, or simply opening our 401k and investment statements. We understand the challenges and frustrations these things often present. There are always times like this when we need to refocus on what we can control and reflect upon our goals and future plans. Life invariably will throw us curveballs, yet we stand at the plate ready to take our swing. Even in the face of these challenges, I am encouraged by the resiliency we all possess. 2022 was certainly interesting with the rising rate environment. 2023 has had its share of ups and downs, but there is still time on the clock. I plan on making the most of it, as I hope you do as well. As always, we are here for you.
Have a wonderful weekend!
Christopher E. Wasson, CFP®
Mosaic Asset Partners, LLC
1122 Kenilworth Drive, Suite 310
Towson, MD 21204
410.821.0089 fax 410.821.5993
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The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.