Market Update | February 5, 2024

The interest rate outlook has been at the top of the financial news since the Federal Reserve’s meeting last week. Last Wednesday, the Fed suggested interest rate cuts are not imminent. The financial markets heard that message, and the markets also inferred that rate cuts may happen at a slower pace than previously expected once the rate cuts do begin.

Yesterday in an interview, Fed Chair Jerome Powell reiterated that the central bank will proceed carefully with rate cuts this year. “We just want some more confidence before we take that very important step of beginning to cut interest rates,” he said. That remark referenced the Fed’s wish to see inflation moving sustainably down towards 2%. After all, the Fed does not want to lower rates too quickly such that inflation takes roots again like in 2021 and 2022.

Many analysts now believe that the Fed will not cut rates in March. On this topic, Powell said yesterday that “the time is coming” for cuts, just perhaps not yet. As a result, interest rates are rising today. The benchmark U.S. 10-year Treasury is yielding 4.15%, up from around 4.00% on Friday.

For conservative investors, this may be welcome news. It suggests the appealing yields on CDs, bonds, and money markets might persist at near-current levels for a bit longer. We will continue to watch the interest rate landscape, not only as it pertains to conservative portfolios but also more growth-oriented strategies. We aim to be forward-looking and proactive. Yet as long-term investors, we do not believe it is necessary to adjust portfolios every time there is an interest rate change or speculation of one.

Leave a Reply

Your email address will not be published. Required fields are marked *

Form ADV Part 2A
Form CRS