The Fed Speaks and the Markets Rally. What Should You Do Now?

Atlas Analytics’ Weekly Subscriber Update

The Super Bowl for monetary policy conferences concluded on Friday, and Jay Powell, Chairman of the Federal Reserve’s Federal Open Market Committee (FOMC), grabbed the ball, ran for a touchdown, spiked it, and did a dance. The market cheered.

It’s no secret Powell’s tenure as Chair is coming to an end, and for his final keynote speech at the Jackson Hole Economic Policy Symposium, he officially greenlit what market watchers and financial insiders had known for a while: rate cuts are coming.

Currently residing between 4.25% and 4.5%, the Federal Funds Rate (the U.S. benchmark for short-term interest rate) is on the verge of falling, perhaps by as much as 50 basis points in the upcoming September FOMC meeting.

That shift matters: lower borrowing costs boost valuations in the short run, but they also signal the Fed’s concern about slowing growth.

Long-time Atlas Analytics readers aren’t surprised. Back in July we wrote, “I Hate to Say It, But Trump Is Right: Interest Rates Should Be Lower.” For months, we’ve argued that the FFR was in restrictive territory and that a return to neutral was inevitable, which we call economic gravity.

The Market Rallies, But For How Long?