Advisors roll with the Fed’s well-telegraphed monetary policy move
Financial advisors and market watchers will continue looking toward September for the Federal Reserve’s next swipe at the inflation giant it hasn’t yet been able to slay.
The quarter-point hike Wednesday, which came after a rare pause in the rate-hike cycle in June, sends the overnight rate to a new range of between 5.25% and 5.5%, while inflation hovers above the Fed’s 2% target rate at around 3.5%.
Even though rate hikes are generally seen as a drag on stocks, most financial advisors are ready to pull off the bandage in order to get past a tightening cycle that has pushed rates to their highest point in 22 years.
“The Fed was late to the party with regards to keeping inflation in check, so it’s time to play catch up,” said Chuck Failla, president of Sovereign Financial Group. “I also think the Fed believes that if they show too much dovishness now, then inflation will be harder to manage.”
The Fed doesn’t meet in August, but Paul Schatz, president of Heritage Capital, expects it to take another pause in September to measure the inflation data against the impact of the latest rate hike.
“In the grand scheme of things, this is what they have been telegraphing since they started raising rates,” Schatz said.
The June pause throws a wrench into the works of forecasting the Fed’s next moves, said Jeanette Garretty, chief economist and managing director at Robertson Stephens.
“Now that they’ve set the precedent of skipping a meeting and going back to raising rates, which is not typical Fed behavior, I’m on the fence about what they might do in September,” she said.
While Fed Chairman Jay Powell has offered the markets new levels of transparency regarding the direction of monetary policy, Garretty said it’s still difficult to
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