September 2024 has been a wild ride for financial news. The Federal Reserve dropped interest rates, leading to great gains in the stock market, a turnaround for investments, and a drop in mortgage rates. Today, we will dive into this news for the month, and more, and wrap it all together on how it affects you.
Federal Reserve Impacts, Pt. 1 – Stock Market & Investment Turnaround
The Federal Reserve dropped interest rates on September 18th, and immediately the stock market took notice. Since the 18th, we’ve seen amazing gains in the market, with nearing record highs for the S&P 500 AND DJI. More so, even crypto-favorite Bitcoin, which is currently trading above $66,000 as of September 27th. We discussed the impacts of a move like this last week on the Freedom Finances show, but I’d like to dive in a little more.
The goal of the interest rate drop from the Fed was to give the U.S. economy an artificial boost. The labor market has been stagnant and weak, and inflation has been relatively flat. Because of these factors, interest rates were primed for a cut. Cutting rates has a few different effects, including raising prices (in the stock market, and potentially inflation), as well as dropping rates for mortgages, and potentially boosting the labor market. The last few years have been mired in economic mediocrity, with high inflation, high unemployment, and high mortgage prices. Unfortunately, because inflation was on the rise, the Fed was forced to increase rates to slow the inflation rate.
The stock market is a great reflection of the attitude of investors and businesses around the U.S. and the world. Stock market prices are increasing, which is a great thing for investors (both professional investors and average citizens). However, it’s also a reflection of what might come in the future for consumer prices. As we’ve discussed, high rates help lower inflation, and since we’re seeing lower rates (albeit still high), we might see prices move back upwards.
Mortgage Rates – a 2-year low!
One amazing piece of news as it relates to interest rate cuts from the Fed is the impact on mortgage rates. According to Freddie Mac, 30-year mortgages have hit a 2-year low interest rate at 6.08% for the week of September 26th. Considering just a year ago in October, interest rates were 7.79%, this is great news for those looking to purchase a new home and those looking to sell their home.
The Federal Reserve is likely to continue cutting interest rates before the year is over, so consumers likely will see even lower mortgage rates before 2025. Hopefully, we won’t see too high of demand in the housing market, as prices are already at or near all-time highs. However, if prices do increase, the lower mortgage rates will help consumers afford their monthly mortgage payments.
How it All Affects You & What to Do
It can be difficult to process all the financial and economic news in the world. Those with political agendas will try to use this news to influence you, while some might be overly positive or overly negative about the news. Changes in economic policy and regulations are mostly out of our control, and shouldn’t impact the economic decisions we make. Sure, prices and rates maybe to high to buy a new house for some, but generally speaking, we should continue some basic principles. Continue to follow a budget (or make one, if you haven’t already), invest responsibly, and increase your financial literacy. In the meantime, don’t wait to make major financial moves of your own for the perfect economic conditions. Instead, make the moves based on what is right for you and your family.
