Indicators suggest US economic activity continues to expand and the US cuts rates

 

For the second time this year, the US Federal Reserve (the Fed) lowered the target range for the federal funds rate. The range was decreased by 25 basis points (bps) to 4.50-4.75%.

 

In the Federal Open Market Committee (FOMC) statement, the Committee acknowledged that labor market conditions have generally eased, and that the unemployment rate has moved up but remains low. Inflation has made progress toward the Fed’s 2% objective but remains somewhat elevated. The FOMC also noted the balanced risks to achieving its employment and inflation goals support its decision to reduce the target range.

 

Leslie Alba, Director, Portfolio Solutions, Total Investment Solutions at CIBC Asset Management says, “With market participants expecting the 25bps cut, it’s not surprising that markets were unemotional following the announcement. In contrast to the US presidential election earlier this week, the result of the Fed’s meeting seemed relatively more certain.”

 

“While we expect continued market volatility in light of political and economic news, when the dust settles, we believe asset prices will revert back to the financial productivity of those assets. Our advice to investors is to remain invested and to stay focused on their long-term financial goals. Historical data shows that timing markets around events like these is not a reliable investment strategy.”

 

“Holding a diversified portfolio of stocks and bonds is the best way to prioritize your investment goals, while also ensuring your portfolio has exposure to any changes in leadership in the financial productivity of asset markets as these occur.”

 

At CIBC Private Wealth, we take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail or have questions about your investments, please get in touch with me anytime.