Highlights From This Week’s Fed Speakers

The next Federal Open Market Committee (FOMC) meeting might not be for another couple weeks, but that doesn’t mean that the Fed has been sitting on its laurels ahead of the meeting.

On Wednesday, the Fed released its Beige Book survey in preparation for its September FOMC meeting.

The good news is the Beige Book survey acknowledged that inflation pressures are abating, and that job growth is slowing. Almost all of the Fed’s 12 districts indicated that businesses “renewed their previously unfulfilled expectations that wage growth will slow broadly in the near term.”

The only inflation warning was a comment saying that “contacts in several districts highlighted sharp increases in property insurance costs during the past few months.” So apparently the insurance companies fleeing California, Florida and other high-risk areas may be hindering some housing markets.

Several Fed members also spoke throughout the week, offering their insights on the economy and the current state of inflation.

So, in today’s Market 360, let’s review the comments four Fed officials made about inflation and interest rates. We’ll consider what this means for the next FOMC meeting, and then I’ll share how to build your portfolio while we wait on the Fed.

Comments From Four Fed Officials

Boston Fed President Susan Collins: She expects that the economy will start to weaken as we round out the year – and stay weak throughout 2024.

Although recent U.S. economic data has shown that the economy is accelerating (the Atlanta Fed expects GDP growth of 5.6% in the third quarter), Collins believes there are underlying issues. She said that people’s pandemic savings are dwindling and spending will become more sensitive to interest.

She also believes that “an orderly slowdown” can bring inflation toward price stability.

Chicago Fed President Austan Goolsbee: He clarified his stance that the economy can get on a “golden path” to getting inflation down while avoiding a recession. He believes that it’s a possibility, though not a guarantee.

He noted that he wants to see inflation in goods and housing slow, but believes monetary policy is working.

He said: “We are very rapidly approaching the time when our argument is not going to be about how high should the rates go; it’s going to be an argument about how long do we need to keep the rates at this position.”

New York Fed President John Williams: He said he expects the current unemployment rate of 3.8% to rise to the low 4% range – but doesn’t expect joblessness to reach levels of past recessions.

On the topic of inflation, he declined to say whether he believes the Fed should raise rates again. He said, “Things are moving in the right direction and we’ve got policy in a good place, but we’re going to need to continue to be data dependent, watch developments and assess what we need to do.”

He also said that “all that talk about we’re about to have a recession has vanished.”

Dallas Fed President Lorie Logan: “Another skip could be appropriate when we meet later this month… But skipping does not imply stopping. In the coming months, further evaluation of the data and outlook could confirm that we need to do more to extinguish inflation.”

The bottom line: Based on their comments, it seems that the Fed is leaning towards not raising key interest rates at its next FOMC meeting. Personally, I don’t expect the Fed to hike key interest rates, especially given that the Beige Book cited slowing economic growth in July and August. The majority of the market agrees, as analysts now believe there’s a 93% chance that the Fed does not raise key interest rates in September.

I should also add that the Fed could even start cutting rates as early as December. The annual core rate of inflation should be under 2% later this year, which could be the final push our central bank needs to cut rates.

Build a Diverse Portfolio

In the current market environment, you’ll want to build a diverse portfolio of fundamentally superior stocks. You do not want to merely invest in one hot trend, one industry or one bucket of stocks.

As an example, the last two months represented my strongest relative performance for my Growth Investor High-Growth Investments Buy List compared to the S&P 500 since last October and November. The strength of my overall Buy List is a direct representation of owning stocks across a variety of industries – AI, energy, consumer, solar, homebuilders and building supply companies.

If you can build your personal portfolio with my fundamentally superior Growth Investor stocks, you can invest confidently and not worry about all the distractions that tend to derail the stock market… like Fed officials’ speeches and statements this week or the upcoming FOMC meeting.

To gain access to my Buy Lists now, join me today at Growth Investor. You’ll also get immediate access to all my Monthly Issues, Weekly Updates, Special Market Podcasts and Special Reports.

Click here to become a member of Growth Investor today.

(Already a Growth Investor subscriber? Go here to log into the members-only website.)

Sincerely,

Louis Navellier

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