Elections & Rate Cuts: What Market Shifts To Watch Now?

November 12, 2024

Last week was packed with major events. College basketball returned! As much as I would love to talk about my Cyclones having a top 10 men’s and women’s team, today we’ll discuss the other recent major events: the Presidential Election and the Federal Open Market Committee (FOMC) meeting.

The Presidential Election

Regarding the election, I’ll direct you to Michael’s article from a few weeks back, How Presidential Elections Impact the Stock Market. While the stock market has fluctuated under the leadership of both parties, the S&P 500 has trended higher over the long term, no matter who’s in office. Elections often create short-term uncertainty, but as long-term investors, it is best to remain broadly diversified and fully invested.

The Federal Open Market Committee Meeting (FOMC)

The FOMC met for the first time following the start of the Fed’s rate cut cycle. In September, the Fed reduced the federal funds rate by 50 basis points (one-half of one percent). The committee continued cutting last week, reducing the federal funds rate by 25 basis points. The Fed noted that risks to achieving its employment and inflation goals are roughly in balance, as inflation continues to cool, and the labor market shows signs of slowing.

Keep in mind the cuts to the federal funds rate do not guarantee a similar reduction in longer-term rates as Eric discussed last week.

Future Rate Cuts

Moving forward, the Fed stated it will remain data dependent when making decisions on further rate cuts, but that doesn’t stop the Fed or the markets from making projections. The dot plot released in September showed Fed officials were split on the possibility of another 25 basis point cut at the final meeting of the year in December. The markets are pricing in a roughly 65% chance of a rate cut at the next meeting. Either way, short-term rates will continue to move lower as we move into next year.

While the political and economic landscape is ever-changing, our philosophy remains the same. Accounts under our management will remain fully invested and broadly diversified. If you are not fully invested and have cash sitting on the sidelines, it remains an attractive time to lock in intermediate-term bond rates.

Reach out today if you would like to discuss your portfolio or are interested in locking in attractive fixed income rates.  Your financial success matters to us!