By zobaair @ Adobe Stock
UPDATE 10.14.24: In September, the Federal Reserve did cut rates by 50bps and signaled another 50bps in cuts by the end of 2024. I’ve updated my Payday Indicator chart below so you can see the diminishing yield investors can expect on their money.
Originally posted August 2, 2024.
The market believes the Federal Reserve is poised to cut rates in September and that the Fed could cut them by 75 basis points by the end of the year. Of course, this analysis comes after the market completely misjudged the Fed’s intentions about cuts in December 2023. So, take all predictions with more than a grain of salt. But comments from Jerome Powell and other Fed officials indicate they may be more seriously considering cuts now than last year.
Long-time readers will remember my Payday Indicator, an indicator based on stock and bond yields that gives an approximation of the yield on a balanced portfolio. I have used this basic calculation as my guide since I graduated from Shaker Heights High School, listening to Chuck Berry in the late ’50s. I’ve watched this number for over six and half decades, and for most of the last two, investors weren’t getting paid nearly enough. Historically low Federal Reserve rates sapped the yield investors could expect to earn on their money. Only since 2022 has my indicator returned to something remotely normal, though nowhere near what it was in the 80s or even the early 90s.
For now, you’re still getting paid to invest, but with the Fed poised to potentially cut rates, that may not last for long. Act accordingly. Click here to find your port in a storm and sign up for my email alert.