Fed policy ‘roadmap’.

As the market expected, the Federal Reserve increased rates by .75% at their most recent meeting. The consensus is that they will begin to slow down future increases with an expected .50% hike in December. From there, rate hikes are likewise projected to move down towards more traditional .25% bumps.

The Fed’s eventual goal is to reach a 5.0% ballpark level before holding steady to allow the monetary tightening to work its magic on inflation. Should additional inflation data emerge, this ‘roadmap’ of hikes is certainly destined to change. Any adjustment to the Fed’s plans will result in market volatility (more than expected tightening = market headwinds; less than expected tightening = market tailwinds).  

Inflation.

Recent inflation reports indicate an easing of inflationary pressures. While we still have a long way to go before declaring that inflationary market conditions are under control, it is certainly a step in the right direction. Additional lower readings on inflation need to occur for (1) the markets to continue recovering; and (2) the Federal Reserve to begin easing off on their monetary policy tightening. 

The housing market. 

The housing market is not necessarily impacting the equity markets as of yet. But rapidly climbing interest rates are creating weakness in housing pricing and demand. Pricing in both home sales and rents are likely to continue to soften moving forward.