Last week, the Federal Reserve made a significant move by cutting interest rates for the first time since March 2020. The federal funds rate was lowered to a range of 4.75% to 5%, following the Fed’s last rate increase in July 2023. Prior to this cut, the rate was at a two-decade high. In response, the stock market gained over 1% for the week, with the S&P 500 and Dow Jones Industrial Average both reaching new all-time highs, despite some volatility in returns.

Fed Chair Jerome Powell emphasized two key points regarding the rate cut. First, the goal was to sustain current economic momentum, not because it needed to be revived. Second, while progress has been made in the fight against inflation, the battle is not yet fully won.

Some economic indicators suggest the economy still has positive momentum. For instance, last week’s retail sales and housing data exceeded expectations, and the Atlanta Fed’s GDPNow model projects third-quarter GDP growth at 2.8%, an improvement from prior estimates and above the long-term average.

Looking ahead, this week brings several important economic reports. On Thursday, a revision of second-quarter GDP is expected to show an upward adjustment, while on Friday, the Fed’s preferred inflation gauge, Core PCE, is projected to come in at 2.7% year-over-year.

So, what should investors make of the Fed’s rate cut, and what can we expect from the Fed going forward? According to the CME FedWatch Tool, market expectations are split for the Fed’s next meeting on November 7th, with a 50% chance of another 25 basis point (1/4 of 1%) cut and a 50% chance of no change.

As for the impact of the recent cut, it remains uncertain. Some experts argue the Fed should have cut rates more aggressively with earlier and deeper cuts, while others believe the cut was unnecessary. As for the done deed of last week’s 50 bpts cut, effects of rate cuts typically take time to unfold. Much like the shortest day of the year of sunshine isn’t the coldest, or the longest day isn’t the hottest, rate cuts need time to work through the economy.

Add it all up...

Stay invested. Stay diversified. Stay disciplined.

 

If you have any questions or comments, please let us know at strategists@brinkercapital.com or at rusty@orion.com. Thank you for your time and trust. See you next week!


 

Get Your Own Market Commentary

Client-Friendly Weekly Wire

Want a version of Weekly Wire you can send directly to your clients? Subscribe to our Weekly Wire newsletter and get a client-friendly version every Monday. Simply download, add your firm's logo, and use with your clients!

Subscribe Now

 

Key Data

Stocks, Bonds, Alternatives, and Real Assets as of September 20, 2024

Security Name

Risk Score

1 Wk

1 Mo

QTD

YTD

1 Yr

3 Yr Ann.

Global Equities (60% US, 40% Intl)

100

1.30%

1.77%

4.99%

16.15%

25.75%

7.20%

S&P 500 Total Return

102

1.39%

2.02%

4.76%

20.78%

31.45%

11.10%

Dow Jones Industrial Average

97

1.67%

3.25%

8.04%

13.21%

24.57%

9.60%

NASDAQ 100 Total Return

122

1.44%

0.45%

0.75%

18.35%

33.33%

10.58%

TV Benchmark

107

1.50%

1.91%

4.52%

117.45%

29.78%

10.43%

Morningstar US Large Cap

102

1.42%

1.70%

4.11%

22.68%

33.56%

911.38%

Morningstar US Mid Cap

113

1.63%

3.72%

7.54%

13.19%

24.74%

5.65%

Morningstar US Small Cap

125

2.40%

4.08%

7.62%

9.60%

23.09%

3.94%

Morningstar US Value

98

1.37%

2.77%

7.95%

15.30%

23.18%

11.65%

Morningstar US Growth

126

1.61%

2.65%

3.80%

15.16%

29.34%

1.74%

MSCI ACWI Ex USA 

98

1.03%

0.98%

4.82%

11.15%

18.49%

3.28%

MSCI EAFE 

101

0.43%

0.81%

5.00%

11.04%

18.59%

4.78%

MSCI EM

98

2.27%

0.43%

2.82%

10.71%

17.35%

-1.17%

Bloomberg US Agg Bond Index

27

-0.22%

1.29%

5.45%

4.70%

10.43%

-1.66%

Bloomberg Commodity Index

70

2.14%

2.46%

-1.64%

3.42%

-3.45%

4.52%

Wilshire Liquid Alternative Index

25

0.43%

1.18%

2.42%

6.18%

9.31%

2.27%

US Dollar

10

-0.74%

-1.25%

-4.96%

-0.71%

-4.36%

2.59%

Bloomberg US Treasury Bill 1-3mo

1

0.12%

0.51%

1.26%

3.98%

5.57%

3.54%

Source: Morningstar

The TV Benchmark represents an average of the S&P 500, Dow Jones IA, and NASDAQ 100 return indexes. The Orion Risk Score represents risk relative to the global equity market.

 

 

Interest Rates as of September 20, 2024

Rate

This Week

1 Wk Δ%

13-Wk Treasury Yield

4.55%

-0.21%

10-Yr Treasury Yield

3.73%

0.08%

Bloomberg US Agg Yield

4.27%

0.02%

Avg Money Mkt Yield

5.03%

-0.04%

Avg 30-Yr Mortgage Rate

6.31%

-0.10%

Sources: Yahoo Finance, S&P Global, Crane Data, BankRate

 

 

Key Economic Data Last Week

Data Point

Expectation

Release Date

US Retail Sales

-0.2%

0.1%

Housing Starts

1.31M

1.36M

FOMC Interest Rate Decision

Cut

Cut 50 bps

Existing Home Sales

3.9M

3.9M

US Leading Economic Indicators

-0.3%

-0.2

Sources MarketWatch, First Trust

 

Key Economic Data This Week

Data Point

Expectation

Release Date

S&P Flash Services PMI

55.4

9/23/24

S&P Flash Manufacturing PMI

48.4

9/2324

New Home Sales

700k

9/25/24

Durable Goods Orders

-3.0%

9/2624

GDP 2nd Revision

2.9%

9/2624

PCE YoY

2.2%

9/27/24

Core PCE YoY

2.7%

9/27/24

Sources MarketWatch

 

More Just for You

Want More Resources?

Unlock a wealth of market commentary resources from Rusty Vanneman, Chief Investment Strategist, and his team.

Explore More
The views expressed herein are exclusively those of Orion Portfolio Solutions, LLC d/b/a Brinker Capital Investments, a registered Investment Advisor, and are not meant as investment advice and are subject to change. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation, and the particular needs of any specific person.
An index is an unmanaged group of assets considered to be representative of a select segment or segments of the market in general, as determined by the index manager for the purposes of managing a specific index. You cannot invest directly in an index.
The CFA® is a globally respected, graduate-level investment credential established in 1962 and awarded by CFA Institute — the largest global association of investment professionals. To learn more about the CFA charter, visit www.cfainstitute.org.
The CMT Program demonstrates mastery of a core body of knowledge of investment risk in portfolio management. The Chartered Market Technician® (CMT) designation marks the highest education within the discipline and is the preeminent designation for practitioners of technical analysis worldwide. To learn more about the CMT, visit https://cmtassociation.org/.
Think2perform’s Behavioral Financial Advice program integrates traditional finance practices with psychology and neuroscience to improve emotional competency and decision-making behavior that increases effective usage of the financial plan with clients. To obtain the Behavioral Financial Advisor (BFA) designation, participants must complete a self-directed course, which takes 20-30 hours to complete, and includes a mix of interactive exercises, videos and case studies. To learn more about the BFA, visit https://www.think2perform.com.
Wealth Management services offered through Orion Portfolio Solutions, LLC d/b/a Brinker Capital Investments a registered investment advisor.