02 Nov 2023 Fed Up With Questions

How long will the Fed keep rates where they are? Is there another rate hike coming, or will rates start to come down again? If so, when? In the meantime what’s in store for my portfolio?

The answer or course—to these and many other important questions—is “No one knows.” On Wednesday of this week the Fed did decide to keep rates where they are (again), and they are likely to keep them there at their last meeting of 2023 (current futures markets give a 1/5 chance of a quarter point increase at that meeting). And Chairman Powell did say pretty unequivocally that they aren’t considering reducing rates right now (but even if they were considering, he would never say, as it could risk undoing some of the work they have done to date). And while these rates likely won’t be here for a long time, our economy is strong enough at the moment that definition of “long” is probably longer than we would have thought going into this whole process.

So, we don’t know, and no one knows. But that doesn’t mean we shouldn’t ask the questions.

Because while we don’t know exactly what the answers are, the questions can move us toward productive behaviors that work well in such uncertain times: Reducing spending to introduce more cashflow margin in your life, continuing to buy into a diversified portfolio especially when assets are trading down (if still saving), examining retirement distribution sources, looking for prudent tax planning opportunities, and committing to patience over panic.

These are behaviors, by the way, that always work. It’s just that they become more important in weird times, because they help keep us from all the destructive behaviors that we are tempted by and cajoled into by fear and greed mongers.

What you feel is real, and for better or worse the uncertainty is inevitable. Just remember that what works well, works well. And what works well is sustainable and consistent action, over long periods of time, regardless of circumstance.

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