The Fed’s Path Forward

Good Morning Ladies and Gentlemen

”There may be more beautiful times, but this one is ours.”

Jean-Paul Sartre  

ISM

On Tuesday, the stock markets declined following Monday’s Labor Day closure. Tech stocks, susceptible to economic changes, were impacted by discouraging sentiment data from the industry. The Purchasing Managers‘ Index from the Institute for Supply Management (ISM) continued to indicate an economic downturn. However, it is anticipated that this decline will be brief, with investors eagerly awaiting the potential interest rate reductions by the Federal Reserve in the coming days.

The Fed’s Path Forward

The current target interest rate the Federal Reserve sets ranges between 5.25% and 5.5%. Since mid-2023, short-term USD interest rates have remained at this level. The Fed has maintained a firm hold on the rates despite a notable decrease in inflation. However, it seems a shift may be underway. During this year’s Jackson Hole meeting on August 23, Fed Chairman J. Powell surprisingly suggested that inflation risks were in check and that the Fed might consider lowering the key interest rates. The interest rate policy will likely emphasise the labour market, which has recently shown weakness. The likelihood is high that the US Federal Reserve will decrease the key interest rate by 0.25 percentage points at the next interest rate meeting on September 18.

Today’s Economic Indicators

Today, several macroeconomic indicators are being released in the U.S. These indicators provide essential information about the labour market in the world’s largest economy, which has been losing momentum in recent months. The indicators include the unemployment rate, the number of employees outside the agricultural sector, and hourly wages.

Conclusion

Once again, everything boils down to perception. If market participants view today’s numbers favourably and refrain from raising concerns about the US economy losing momentum faster than the Federal Reserve intends, markets will experience an upturn. However, if market participants perceive today’s numbers negatively, with concerns about a significant economic downturn, markets will decline, at least in the short term.

Ladies and Gentlemen

As always, please share your opinion with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li

Many thanks, indeed!

I wish you an excellent start to the day and the weekend!

Yours truly,

Stefan M. Kremeth
CEO & Head of Wealth Management
Incrementum AG – we love managing assets

Tel.: +423 237 26 60
Cell: +41 79 303 48 39
Im alten Riet 153
9494 Schaan/Liechtenstein
Mail: smk@incrementum.li