The Chair of the Federal Reserve remains one of the most important positions in the global economy. I cannot imagine the various forms of pressure that filter into decision making.
We are in a time of our economy, monetary policy needs to get it right.
Looking back, Fed Chair Powell, in fall of 2018 was in the process of raising rates, suggested rate increases had a long way to go. The result, a market correction in the 4th quarter of 2018. He changed his view in 2019.
Most agree, the Fed waited entirely too long to begin raising rates as the so-called transitory rate of inflation peaked @ 9%, June 2022. The result, rather obvious. I’m not blaming the entire inflation situation on Powell, as that would be mis-directed.
Last Friday, Chairman Powell, speaking at Jackson Hole stated its time for policy changes. The message, rates will be lowered beginning with the next Fed meeting on September 17-18th.
The unemployment rate has quietly moved from a low of 3.4%, April 2023 to 4.3%. Also reported, there were 800,000 fewer jobs created in the past year, ending March.
I am optimistic, Powell sees a potential slowing economy and now wants to reduce rates to attempt to induce a “soft-landing.” I’m hoping he truly does get in front of the situation and does not continue to be so “data dependent.”
Markets Move Higher
The Dow, S&P 500 and the Nasdaq all moved higher over 1% for the week. The standout, small caps as the Russell 2000 rose 3.29%. Foreign stocks increased 2.86% and emerging market stocks .91%.
Bond yields headed lower anticipating Powell lowering rates. The 10-year US Treasury ended the week yielding 3.795%.
This week, we will hear the anticipated earnings report for Nvidia, various housing reports and the Fed’s favorite employment gauge, the Personal Consumption Price Index (PCE).
I will be curious on Wednesday as weekly mortgage applications are reported. Mortgage rates are falling along with Treasury rates, making the cost of funds more affordable. This may be good and not so good news. Good news as more people can qualify. Not so good if the price of home ownership trends much higher.
Social Security Filing Update
In 2021, 2.7 million people filed for Social Security Retirement Benefits.
- 25% filed at their full retirement age (FRA), claiming 100% of their monthly benefits.
- 10% filed at age 70, collecting the highest monthly amount for the remainder of their lives and provides the highest survivor benefit.
- 29% filed at age 62.
- The remainder filed mostly between 62 and FRA and some between FRA and age 70.
The reasons cited for collecting early, agreeing to a reduced benefit for the rest of their lives.
- Social Security will run out of money.
- Benefits will be cut anyway.
- They will invest the $
- Need the $
When money is on the table, I find it interesting how people rationalize to claim their benefit early and take a reduced amount. I certainly understand in some situations it makes sense or is necessary. From my years of working with clients and their Social Security benefits (since 2008), I know of no client who regrets, waiting until at least their Social Security Full Retirement Age or delayed, many until age 70.
