With inflation at its lowest level since early 2021, an uptick in the unemployment rate, and growing worries about softening consumer spending, the cut was anything but a surprise. But it does signal the start of a pivot in how the average investor should position her portfolio, as wealth planners and other experts tell Fortune.
For starters, investors should expect short-term volatility, especially if the Fed embarks on a sequence of rate changes, says Chester Spatt, finance professor at Carnegie Mellon's Tepper School of Business. That will be doubly so considering that the timing of the first cut coincides with the home stretch of a presidential race, when investors tend to overreact to political plot twists. "These periods where the direction of rates is changing tend to be periods of uncertainty," says Spatt.
Driving that uncertainty, of course, is the question that's been ricocheting around investors' minds for months: Has the Fed nailed a "soft landing," slowing inflation without causing a recession? Or is September's rate cut a sign that higher interest rates have gone too far and made the economy too weak?
The bad news is that in recent years, declining interest rates and recessions have often gone hand in hand as the Fed tries to backstop Wall Street and Main Street: Seven out of 11 periods of sustained rate cutting since 1980 have coincided with recessions, according to research by Hartford Funds.
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
THE NEW GOLD RUSH
Gold prices have soared amid global uncertainty and a central-bank-driven buying spree. But this time, the gold mining industry looks very different.
A New Season for Giving
As the PGA TOUR kicks off its 2025 season alongside its sponsors in Hawai'i, the organization is continuing to make an impact in local communities.
WELCOME TO ELONTOWN, USA
The small town of Bastrop, Texas (pop. 12,000), has become a home base for Elon Musk's business empire. What comes next is anyone's guess.
100 MOST POWERFUL PEOPLE
Our inaugural, authoritative ranking of the leaders whose innovation and impact have elevated them to the top of the business world.
ARE CEO SABBATICALS THE ULTIMATE POWER MOVE?
WHEN VENTURE capitalist Jeremy Liew and his wife were dating, they talked about how one day they would take a year to travel the world. \"That's how we'd know we'd made it,\" Liew says.
WHAT ARE THE BEST METRICS FOR MEASURING A STARTUP'S POTENTIAL?
IN HIS 2012 ESSAY \"Startup = Growth,\" Paul Graham talks about a 5% to 7% weekly growth rate as table stakes for startup success. If you're growing 10%, he says, you're doing \"exceptionally well.\"
TECH POLYMARKET'S ELECTION ACCURACY MADE SHAYNE COPLAN A STAR-BUT AN FBI RAID POINTS TO TROUBLE AHEAD
IN NOVEMBER, Shayne Coplan had a week he'll remember for the rest of his life: He got a phone call from the highest echelons at Mar-a-Lago. He went on TV for the first time. And his New York City apartment was raided by the FBI.
WHY BIG TECH IS THE NUCLEAR INDUSTRY'S NEW BEST FRIEND
OVER THE PAST several years, Big Tech firms like Google and Microsoft have trumpeted ambitious plans to go carbon-neutral, or even carbon-negative, by 2030. But then the generative-AI boom came along and threw a giant wrench in their plans.
WHAT PALMER LUCKEY, THE MAN REVOLUTIONIZING WARFARE, IS AFRAID OF
PALMER LUCKEY, the founder of the $14 billion Al-powered weapons startup Anduril, has become the face of change in the defense industry.
GLOBAL BUSINESS BRACES FOR TRUMP 2.0
AROUND THE WORLD in 2024, voters chose change: in South Africa, France, Britain, and Japan. But nowhere does the anti-incumbent trend matter more than in the United States.