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Retirement Alarm? Fed Rate Increases 75 Basis Points | News or Noise - YouTube
Channel: Oak Harvest Financial Group
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just last week the federal reserve
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announced they were raising short-term
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interest rates by 75 basis points
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this announcement is just one month
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after chairman jerome powell said the
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central bank was not actively
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considering raising rates three quarters
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of a percent i'm chris parrish chief
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investment officer at oak covers
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financial group in houston texas and
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this is our investment team's midweek
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release we're examining a news item
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headline or story making the rounds from
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publicly available sources and we ask
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is it news or is it noise for your
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investment portfolio this week's topic
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is the fed raising short-term interest
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rates by 75 basis points on wednesday of
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last week the federal reserve raised the
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fed funds rate by 75 basis points in
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order to fight inflation
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it was only a month ago when they said
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they were not considering that much of a
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raise but after friday june 11 consumer
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price index reports showing inflation
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rising faster than they expected
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they changed their tune and leaked a 75
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basis point interest rate increase to
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the press early in the week many tv
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analysts expressed alarm at the size of
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this move stating it's the first time
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since 1994 the fed has made such a big
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move bringing up a date of almost 30
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years ago as if it was so long ago it
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must have been bad for the markets
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i don't know if it will or won't be bad
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for the markets this time over the next
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6 to 12 months
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but the s p 500 is already in bear
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market territory and hiking short-term
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rates into an economic slowdown to
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combat inflation well
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we'll see however i do know back then in
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1994 alan greenspan hiking rates by 75
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basis points did exactly what it was
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supposed to do he raised rates seven
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times by three to six percent in 1994.
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in november of 1994 alan greenspan the
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then chairman of the federal reserve
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announced a rate hike from four and
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three quarters percent to five and a
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half percent
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under greasepan the fed had slowly been
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tightening the screws he was able to
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affect a soft landing in the economy by
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tightening monetary policy and slowing
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inflation to keep the economy from
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overheating in 1994 stocks initially
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dropped minus 10 percent during the
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first half of the year as inflation rose
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early in the year
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however stocks ended the year only
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slightly negative for the whole year
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down around minus two percent back then
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the federal reserve was able to avoid a
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recession and stocks rebounded by
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34 percent in 1995. yes you heard that
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right they rallied by 35 percent over
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the next year
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what's more
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is after the rate hike in november 1994
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stocks dipped slightly before rebounding
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ahead of another rate increase in
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february 1995 according to data from
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cfra research here's that historic chart
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from 1994.
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viewers let it sink in for a bit
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will history repeat
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i don't know and there's no guarantee in
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the stock markets however investor
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sentiment positioning and expectations
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drive stock prices well in advance of
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what most readers are seeing on tv or
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reading in newsletters and many of the
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alarmist headlines often leave out the
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punch line because it doesn't fit their
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bias in this case those stories had a
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negative bias
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the scare tactics are bringing up 1994
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as a data point
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yes it was news because back then the 75
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basis point increased by the fed marked
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the lows in the stock market the next 15
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to 18 months not the highs as many on tv
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would lead you to believe
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at all carvers we think our clients are
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best served by us helping them plan for
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their future needs instead of focusing
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on the past
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the future is always uncertain and
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that's why our advisors and retirement
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planning teams plan for retirement needs
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first and agreed second
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give us call here at oak harvest to
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speak to an advisor and let us help you
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craft a financial plan that helps you
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meet your retirement goals
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call us here at 877-896-0040
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and schedule an advisor consultation
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the whole team here at oak harvest is
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here to help you on your financial
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journey into and through your retirement
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years i'm chris paris and from everyone
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here at oak harvest have a blessed week
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[Music]
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you
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