How did the markets respond to the U.S. Presidential debate? video
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INVESTMENT AND INSURANCE PRODUCTS:
NOT A DEPOSIT
NOT FDIC INSURED
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
NO BANK GUARANTEE
MAY LOSE VALUE
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Elyse Ausenbaugh:
Football is back, and so is J.P. Morgan Wealth Management with the info investors need...this is Top Market Takeaways.
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Top MARKET TAKEAWAYS
SEPTEMBER 13, 2024
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A question appears over gray: How do inflation and the labor market influence the Fed's playbook?
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ELYSE AUSENBAUGH
HEAD OF INVESTMENT STRATEGY,
J.P. MORGAN WEALTH MANAGEMENT
Elyse Ausenbaugh:
Every football fan knows that a winning team has to focus on both sides of their gametime strategy: offense and defense. Each fall, I can't help but think about the Federal Reserve in a similar way. After all, their dual mandate means that their monetary policy gameplan has to both defend the economy against price instability, or inflation that gets out of control, and maintain a healthy jobs market so that consumers can help the economy score.
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Fed's dual mandate
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defend the economy against price instability, or inflation that gets out of control
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maintain a healthy jobs market so that consumers can help the economy score
Elyse Ausenbaugh:
The Fed's winning combo happens when unemployment stays low while inflation runs at a modest, healthy rate around 2%...
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A line graph appears, titled: 'The Fed's policy rate route and market expectations: Federal Funds Rate and Market-Implied Expectations, %.' The vertical axis ranges from 0% to 6%, while the horizontal axis ranges from '15 through '27. A blue line representing 'Fed Funds Upper Bound' populates the chart, then becomes a purple dotted line beyond '24, representing 'Market Expectations.' In '15, the Fed Funds Upper Bound starts at just above 0%, gradually climbing to a peak of nearly 3% in '19. It plummets quickly back down to just over 0% in '20 and stays there until '22. From there, it rises steeply up to a peak of nearly 6% in early '24 and stays there for the remainder of the year. Then, the flowing dotted Market Expectation line drops just before '25, landing between 2 and 3% around '26 and staying there through '27. An orange diamond caps the end of the chart, labeled: 'Fed's estimate of neutral rate.'
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Sources: Federal Reserve, Bloomberg Finance L.P. World Interest Rate Probabilities: Fed Funds Futures. Data as of September 5, 2024.
Elyse Ausenbaugh:
...when that's the case, the Fed aims to keep its policy rate around a neutral level, or one that neither stimulates nor restricts economic activity. But if inflation is running too hot, they have to try to slow the momentum...that's why the Fed hiked interest rates from 2022 and into 2023. On the flipside, if the economy and especially the jobs market slows too much, the Fed might call an audible and lower interest rates to get things going again.
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A question appears over gray: So, what play will the Fed run next?
Elyse Ausenbaugh:
The Fed has kept its policy rate at the same restrictive level for over a year to bring inflation back down. And now that we have convincing evidence that that's the case, their focus has shifted to supporting the jobs market. That's why the next play call by the Fed is widely expected to be a rate cut.
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Key Takeaways
- The Fed has a dual mandate: Maintain price stability and achieve maximum employment
- Raising policy rates tends to slow down economic activity and help get inflation under control when it's running too hot
- Lowering policy rates can help support economic activity and, in turn, the labor market
Elyse Ausenbaugh:
To learn more about the outlook for Fed policy from here and what it could mean for investors, please visit CHASE.COM/THEKNOW
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A logo appears over gray: J.P. Morgan WEALTH MANAGEMENT.
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To learn more, visit CHASE.COM/THEKNOW
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All market and economic data are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.
The views, opinions, estimates and strategies expressed herein constitutes the speaker's judgment based on current market conditions and are subject to change without notice, and may differ from those expressed by other areas of J.P. Morgan. This information in no way constitutes J.P. Morgan research and should not be treated as such. You should carefully consider your needs and objectives before making any decisions --including whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with any investment or financial service, product or strategy prior to making an investment decision. For additional guidance on how this information should be applied to your situation, you should consult your advisor.
Investing in securities involves market risk, including possible loss of principal, and there is no guarantee that investment objectives will be achieved.
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(In bold) Outlooks and past performance is not a guarantee of future results.
Past performance is no guarantee of future results.
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Investment in alternative investment strategies is speculative, often involves a greater degree of risk than traditional investments including limited liquidity and limited transparency, among other factors and should only be considered by sophisticated investors with the financial capability to accept the loss of all or part of the assets devoted to such strategies.
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