What does the Federal Reserve Rates mean for Investors going into the Summer Months? — Value Stock Guide
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With the Federal Reserve likely to cut interest rates this year, investors remain unfazed. That’s because interest rate cuts bode well for stock investments. Investors typically enjoy stronger returns in low-interest rate environments because of consumer and business spending rise.
However, as markets closed June 21 within record highs, more information was revealed as to what Fed members are evaluating in determining what should happen with rates. Instead of focusing on what stocks to buy or sell right now, make sure you understand why the Fed is considering lowering them in the first place.
Understanding how the Federal Reserve impacts the market as a whole and individual industries is crucial if you’ re looking to get a job on wall street. Here, we’ll go over some of the macroeconomics the Federal Reserve is considering as it determines whether to cut, or even raise rates.
Fed Leaves Rates Unchanged as it Sits in Brief Wait-and-See Mode
On June 19, Fed Chair Jerome Powell announced that the bank would not move to cut rates this year. Instead, the central bank will hold off on cutting rates until next year, and then only one or two may happen, Powell indicated.
One of the reasons rates were held steady was to allow members to gather more information about the economy. Also, the Fed is likely waiting to see what will come of President Trump’s meeting with Chinese President Xi Jinping at the G-20 summit this month in Japan. The looming trade war between the two countries has the attention of everyone, including the Federal Reserve.
Any worries that the economy was heading into a recession are aggravated by the negative effects of a trade war. If the U.S. fails to reach an agreement with China, the cost of consumer goods will be impactful. Considering it is the consumer that has held up the booming economy, anything that affects their spending habits will be detrimental. To lessen that sting, the Fed will have even more reason to lower interest rates, not raise them.
