Let’s talk about the latest Federal Reserve meeting with Jerome Powell, his rate hike decision in 2024, and what this means for the stock market, housing prices, and the economy – Enjoy! Add me on Instagram: GPStephan

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THE LATEST INFLATION REPORT:
Inflation increased from 3.1% to 3.2%, year over year, mainly driven higher by the fact that several categories won’t go down. In terms of specifics, Energy increased by 2.3% in the month of February…Food stayed exactly the same, increasing 0.4% month over month (which is the same as Shelter), and Services are up 0.5%, with transportation making up the largest portion of that (rising 1.4% in the last 30 days).

THE STOCK MARKET:
The number of stocks hitting a 52-week high – has hit a 52-week high. In the past, all-time highs led to even more all-time highs one year later – and, besides the 1960s and 1970s era of stagflation – 3,5, and 10-year total returns were also positive.

However, Bespoke Analysts have reported that “Sixty-seven stocks in the S&P 500 that are related to AI have surged by an average of 45.3% since the end of November 2022, when the first iteration of ChatGPT was released to the public.” To make matters even more impressive, “year to date, the average S&P 500 AI stock is up 3.7% compared to a gain of 1.1% for the non-AI stocks.”

On the other hand, the WallStreetJournal does reference the risks of today’s market, comparing it to a company like Cisco in the early 2000s. Back then, “its price-to-earnings ratio of 126 in the year 2000 was clearly overblown…although the issue wasn’t being in a bubble, but selling networking equipment to firms that were. When the digital rush ended, Cisco’s profit and growth suddenly halved.”

THE HOUSING MARKET:
As Jerome Powell says: “The housing market is in a very challenging situation right now’ and interest rate cuts alone won’t solve a long-running inventory crisis” – which, for anyone wondering – amounts to a shortage of 3.5-5.5 million homes. But even when interest rates DO eventually come back down…Jerome was quick to point out that “we’re still going to be back to a place where we don’t have enough housing.”

That’s partly the reason why the top markets are going to be in the Midwest and Northeast, where prices tend to be lower and more affordable. For example, Realtor.com forecasts that in Toledo, Ohio…“existing-home sales will surge 14% and home prices will rise 8.3% this year. Rochester, N.Y., is also positioned for above-average home price gains of 10.4%.” On the other hand, more “trendy” neighborhoods will fall significantly, like Austin Texas, which is projected to decline 12.2% – St Louis at an 11.7% drop – Dallas at 8.4% – and Denver at 5.1%.

Although, nationwide, there is SOME good news in the fact that: inventory IS beginning to rise. According to Zillow, “new listings are up 21% in February compared to last year, and they rose 20% from January.” This is also evidenced by the fact that “more homeowners plan to sell their home in the next 3 years,” possibly with anticipation of mortgage rates eventually coming back down.

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In a surprising turn of events, the Federal Reserve has announced a series of rate cuts in an effort to stimulate the economy and boost market growth. These moves come as a response to recent concerns about a potential economic slowdown and rising inflation rates.

As a result of the rate cuts, prices in the stock market have soared, with many major indices hitting all-time highs. Investors are bullish on the outlook for the economy, as the Federal Reserve’s actions are seen as a strong vote of confidence in the market.

The rate cuts have also led to increased consumer spending, as lower interest rates make it more affordable for individuals to borrow money. This influx of spending has further fueled the market’s growth, leading to record-breaking highs across various sectors.

While the market may be riding high on the wave of rate cuts, there are concerns about the long-term implications of these actions. Lower interest rates can sometimes lead to inflation, as businesses raise prices to compensate for the cheaper cost of borrowing. If inflation continues to rise, it could potentially erode the purchasing power of consumers and lead to economic instability.

Despite these concerns, for now, the market is rejoicing in the wake of the Federal Reserve’s rate cuts. Investors are optimistic about the future and are eagerly anticipating further growth in the weeks and months to come.

In conclusion, the Federal Reserve’s decision to push rate cuts has had a significant impact on the market, with prices rising and reaching all-time highs. While there are concerns about the potential long-term effects of these actions, for now, investors are basking in the glow of a thriving market. It remains to be seen how the economy will continue to respond to these rate cuts in the coming months, but for now, the outlook is undeniably positive.