31 January 2024
2024 Ushers In New Cycle From Fed
The Federal Reserve held interest rates steady at the 5.25-5.50% range on Wednesday, as expected. The big news out of today’s Fed meeting? The central bankers confirmed widespread expectations that interest rate cuts would be seen in 2024. In the post-meeting press conference, Fed Chair Jerome Powell said rate cuts were likely “at some point this year.”
Gold traded higher after the Fed meeting. Meanwhile, stocks fell across the board, in a sea of red as the major stock averages, including the Dow Jones Industrial Average, the S&P 500, the Nasdaq Index and the Russel 2000 all showed losses on the day. U.S. Treasury bond prices also fell.
Stocks skidded even lower during the Fed’s post-meeting press conference as Powell warned: “We still have ways to go on achieving a soft landing” referring to uncertainty about the economy ahead. The Nasdaq and S&P 500 were both down more than 1%.
Timing of Rate Cuts are Uncertain
However, with inflation still above the Fed’s 2% target, the central bank made no promises on the exact timing of interest rate cuts. “The committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” the Fed’s statement said.
The most recent Consumer Price Index (CPI) report showed that inflation remains higher than the Fed would like, at a 3.4% annual rate.
A key concern for Fed policymakers is that inflation could settle in and stabilize at a rate above the Fed’s desired 2% target rate. While inflation has come down from its 9%+ peak, getting the consumer price increases down to the 2% mark could be challenging, as economists have warned for months.
Gold Attracts Fresh Safe Haven Buying
Investors turned to gold Wednesday afternoon, as fresh safe-haven buying boosted the precious metal higher, while stocks and bonds fell. Physical demand for gold has been strong in recent months as gold climbed from its October low at $1,822.70 to above the $2,000 level currently.
Fed interest rate cuts are expected to continue to boost gold prices higher throughout the year. Indeed, many Wall Street firms forecast gold will hit all time gold for 2024.
A new cycle for the Fed begins, which brings the value of gold into strong focus. For thousands of years, gold has served as a store of value, a tangible asset to preserve and grow wealth – and that role has taken on new importance in our economy today as inflation continues to erode the value of paper money. Is it time for you to trade some of your paper money for gold? Call your Blanchard portfolio manager today if you have questions about where the economy is headed and what it could mean for your wealth. We’re here to help.
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