(The Epoch Times)—For the first time in more than four years, the Federal Reserve is getting ready to cut interest rates, which could impact everything from U.S. stocks to bonds to savings accounts.
Speaking at the central bank’s annual Jackson Hole Economic Symposium on Aug. 23, Fed Chair Jerome Powell said at the conference of bankers, economists, and monetary policymakers that “the time has come for policy to adjust.”
“Inflation has declined significantly. The labor market is no longer overheated, and conditions are now less tight than those that prevailed before the pandemic,” Powell stated in his widely anticipated prepared remarks. “Supply constraints have normalized. And the balance of the risks to our two mandates has changed.”
Heading into the September policy meeting, financial markets will debate the size and frequency of interest rate cuts.
Until then, many might be wondering how the Fed kicking off its easing cycle will affect their finances.
Running of the Wall Street Bulls
In the runup to Powell’s green light to a rate cut, the leading benchmark indexes have performed well and recuperated from the three-day market crash earlier this month.
Year-to-date, the blue-chip Dow Jones Industrial Average is up more than 9 percent, the tech-heavy Nasdaq Composite Index has rallied nearly 20 percent, and the S&P 500 has surged about 18 percent.
Is there more room for gains, or has Wall Street already baked a Fed rate cut into the cake?
The Fed loosening monetary policy as early as next month will likely benefit the stock market, says Robert Johnson, the chairman and CEO at Economic Index Associates and professor of finance at Heider College of Business.
“The near certainty of Fed loosening and falling interest rates in the coming meetings means that investors should be optimistic concerning their expectations for broad equity market returns,” Johnson told The Epoch Times.
Looking at market data from 1966 to 2023, he says, the S&P 500 generated a 16.4 percent return when the Fed lowered interest rates. Conversely, the index has given investors a 6.2 percent return when the central bank has raised rates.
Additionally, in a lower-rate investment climate, the top-performing sectors have been automobiles, apparel, and retail. The worst-performing sectors have been financials, consumer goods, and utilities.
“History is on investors’ side when it comes to post-rate-cut market returns,” according to Craig Fehr, the principal of investment strategy at Edward Jones, in a note.
David Materazzi, the CEO of automated trading platform Galileo FX, thinks the stock market will surge after the Fed’s rate cut and “will certainly cause stocks to burn brighter in the short term.“ At the same time, retail investors must refrain from ”being swept away by the illusion of never-ending growth.”
“This environment can create bubbles and lead to overpriced assets,” he told The Epoch Times. “The smart play is to focus on fundamentally strong stocks that can withstand market corrections when the initial euphoria fades. Don’t let the crowd’s excitement blind you to the real risks that lurk beneath the surface.”
Safe-Haven Assets
The Fed’s high-rate environment for two-plus years has been a boon for bond investors and savers—and financially damaging for borrowers.
Money markets—an arena of short-term debt securities and cash equivalents—have attracted immense investment from institutional investors and armchair traders amid yields of around 5 percent.
Billionaire Warren Buffett and his Berkshire Hathaway hold $235 billion in T-bills (maturities ranging from 4 weeks to 52 weeks), representing about 4 percent of the current supply. This is more than the Federal Reserve’s holdings.
Since the Fed’s quantitative tightening campaign was launched in March 2022, money market funds have witnessed exceptional retail interest.
However, now that the central bank is trimming its policy rate from the current 23-year high of 5.25 percent and 5.5 percent, experts warn bond investors might have to transition to long-term duration instruments.
“As investors become convinced of lower future interest rates, they may invest more into the long end of the yield curve—corporate and treasury bonds with 15, 20, or 30 years’ maturity—where interest rate moves have a greater effect on prices,” Michael Ashley Schulman, the partner and CIO of Running Point Capital Advisors, told The Epoch Times.
The benchmark 10-year yield slumped following Powell’s speech, sliding below 3.8 percent.
Cash’s reign as king over the last couple of years could end, too.
The Fed does not dictate banks’ interest rates on savings accounts, but the central bank’s benchmark federal funds rate does influence rates across the marketplace, Johnson explained.
“Savings account rates will fall as the Fed lowers rates. While the Fed doesn’t set savings account interest rates, its actions influence rates throughout the financial markets from automobile loan rates and savings account rates to mortgage rates and credit card rates,” he said.
“As the Fed lowers its target Fed funds rate, rates throughout the financial markets will fall.”
Gold is another safe-haven asset that would benefit from the institution’s looser monetary policy.
The yellow metal has been one of the world’s top-performing assets in 2024, rocketing 23 percent year-to-date to above $2,500. Although many factors have supported gold’s bull run this year, expectations that the Fed would cut rates have been a driving force because of the opportunity cost of holding non-yielding bullion, says Alex Ebkarian, the COO and co-founder of precious metals dealer Allegiance Gold.
“In a lower interest rate environment, gold tends to become more attractive compared to bonds, as the opportunity cost of holding gold decreases,” Ebkarian told The Epoch Times. “Bonds typically offer weaker returns in such scenarios. Recent adjustments, like Japan’s 0.25 percent rate change, highlight the potential impact of similar moves by the Fed.”
Beyond Interest Rates
While market watchers have concentrated mainly on interest rates, Schulman notes many other factors can influence investor sentiment and the broader financial markets.
“Economic conditions, government regulation, employment, trade and tax policies, and international conflicts also sway attitudes and outlooks,” Schulman told The Epoch Times.
This was observed earlier this month when abysmal economic data triggered recession fears.
During the August 2024 market meltdown, traders panicked about the Institute for Supply Management’s (ISM) worse-than-expected Manufacturing Purchasing Managers’ Index (PMI) and the weaker-than-expected July jobs report that activated the Sahm rule, a key recession indicator. Their concerns were alleviated after three consecutive weeks of decent initial jobless claims reports.
Before the Fed convenes its next two-day Federal Open Market Committee (FOMC) policy meeting on Sept. 17 and 18, the financial markets will digest the August jobs report, more inflation data, and another second-quarter GDP estimate.
Additionally, from the 2024 presidential election to geopolitical tensions, movements on the New York Stock Exchange might be driven by more than just interest rates moving down by 25 or 50 basis points.
In the end, savers might be disappointed in a falling-rate climate, but borrowers and investors will be ebullient in the next policy cycle.
Even with gold and silver prices at record levels, it seems likely that they haven’t hit their peak. For those who want to get in before interest rates are cut, they can back their retirement accounts with physical precious metals by reaching out to Genesis Gold Group.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.