The Fed & A Conversation On What, Why, & How to Respond

THE BIG THING I WANT YOU TO KNOW:

There’s lots of doom and gloom in the news about the possibility of cutting interest rates. It would be unwise to have a knee-jerk response to every bad thing you hear in the news cycle, because there are always ups and downs. The best thing you could do? Jump off the bandwagon.

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There’s a lot of pressure on the Federal Reserve to cut interest rates, but that may not be the best thing for our economy in the long-term…

Let’s jump into the latest interest rate news and unpack:

  • what the Fed is and why they have an important job.

  • how the most boring institution in America suddenly turned into public enemy #1.

  • a healthy way to handle the never-ending news cycle.

a quick crash course:

What is the Fed? Who is Jerome Powell? Why do I keep hearing about him in the news?

 
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Jerome Powell is the chair of the Federal Reserve. The Fed has control over a certain kind of interest rate, and when they increase or decrease that rate it affects interest rates across the board.

This is an incredibly powerful tool because, in theory, if the market isn’t doing well the Fed has the power to lower interest rates, which brings more money into the economy and brings us back up. On the flip side, they can also increase interest rates to regulate inflation.

In 2008, the Federal Reserve dropped interest rates down to basically zero and kept them there for several years. When that didn’t work, they started doing something called quantitative easing, which involved spending trillions of dollars buying bonds to stimulate the economy.

After that, we finally started seeing economic recovery and the Fed started slowly increasing interest rates, which is GOOD.

We have to have enough growth of interest rates to be able to drop them again when the economy needs it. That’s the whole point, right? Well……

 

why all the talk about lowering interest rates if we’re doing pretty good right now.

Trade is at the heart of this issue and we are in an unstable global environment because of it.

Consumer spending has been really strong, inflation is starting to pick up, unemployment is incredibly low, we’re in the longest bull market in history, nearing record rates in the market, so why is there pressure to dramatically lower rates???

Dropping rates right now would be expedient and maybe make the market shoot up or the economy seem stronger in the short-term, but it would set us up for failure in the long-term.

The Fed is watching to see what happens with global trade negotiations, but the president is putting pressure on them to slash rates.

Until we come to an agreement, there are going to be some unknowns… this is important to understand so you can best prepare for your financial world to handle whatever is next.

what does all of this mean for you?

The best response you can have right now is to get off the bandwagon.

Let’s say you’re 55 years old and you’ve been in the workforce for over thirty years. How many crazy, seemingly apocalyptic things have happened in the last thirty years? How many ups and down have you seen? It’s constant. If you live and die by the news cycle, it’s going to drive you crazy. The way to handle it is not to engage it, but also not to avoid it.

The market will drop at some point.

A recession will come at some point.

Assume that these things are going to happen, and then decide what your investment philosophy is based on your situation, your proximity to retirement, and your dreams.

The market is going to tank at some point, but we don’t know when or why. The key is to assume it will drop and then build a plan for it, so you don’t have to look at the news and be filled with anxiety and worry about what the latest headlines mean for your retirement or your investments.

there is a different way!

You invest based on what you know you can control: the dreams that you have, the risk you know you can handle, not based on what your neighbor or your coworker does.

If there’s one thing I’ve learned from working in this industry, it’s that every single person truly is different. Everyone’s situation is unique, therefore your plan has to fit you uniquely.

When you hop off the bandwagon of being swayed up and down and back up again by the news cycle of the day and create a plan that is personalized and perfectly fit for your situation, friends, there is peace. You don’t have to live in the anxiety and the worry, because there is a better way.

Our job is to help people find hope, to find financial peace, and to lay out a plan that pushes them towards their dreams for the future, whatever those dreams are. If you’re curious about what a plan like that may look like or what our process looks like, take a step! Ask a question!

We would love to help you step out of the anxiety of the news cycle and into the peace of a dynamic plan.

 


 
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Where are you seeing the swirling headlines about the FED?

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