End of Summer

Well as I write this the Minnesota State Fair is going on. This always represents the end of summer for us in Minnesota. (Sigh) However, autumn in Minnesota is my favorite time of year!

August started out very volatile, but it looks to be a decent month. Two very big events will dominate the news for the next couple of months. Of course, I am talking about the Federal Reserve regarding interest rates and the presidential election. Let’s look at these with some perspective.

First let’s look at the Federal Reserve and interest rates. It is the opinion of many and myself included that the Federal Reserve will cut short term interest rates in mid-September. This would be the first rate cut since 2019! The market is split on how much of a cut it will be. I am not sure that the amount matters as much as there is a cut. By cutting rates now and in the future the Fed is trying to inject money into the economy to prevent any recession in the future. Inflation has come down substantially since 2022 and will probably come down more. It is currently below 3% annually. What the Federal Reserve does matters. By lowering interest rates it will be both beneficial to stocks and bonds. How beneficial will depend on the overall health of the economy.

Now for the bigger question that I get asked, “What effect does the election have on the market?” Typically, the market has done well in recent presidential election years. An exception to that was in 2008. That year was a miserable one for stocks, but not because of the election. As you will remember that was the year of the Financial Crisis. The market is always more concerned with the economics as I have discussed above, than the politics. A lot of what candidates promise during the campaign never happens. Also, a lot of the campaign issues are social in nature which does not have an effect on the markets performance. Now as the election gets closer you may see the market react to who has the better chance of winning and what their economic policies will be and how it will impact corporate and middle America. As this election appears to be very close (mot have been this way recently), the market may have to take a “wait and see” attitude until the dust settles. I wish I could be more specific, but my crystal ball is a little cloudy. LOL!

In any event I follow the news very closely, but do not expect any major movement in the market for the next couple of months based on these two events.

I hope you have a very enjoyable autumn wherever you are. Be safe and be kind to others.

Sincerely,

Paul D. Hofslien, CFP®

Branch Manager/Financial Advisor

Any opinions are those of Paul Hofslien and not necessarily those of Raymond James. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise. Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification mark CFP® in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing.