“You can trust your dog to guard your house, but never trust your dog guard your sandwich.” Anonymous

These are broad areas that have been getting stronger

1. Insurance Companies
2. Home Builders
3. Gold Miners
4. Gold

These are broad areas that have been getting weaker

1. Lithium
2. Crude Oil
3. Steel Companies
4. Solar Power

Source: Dorsey Wright and Assoc./Thomson Reuters

(See complete List by clicking here: Market Trends)

The Fed just dropped interest rates last week for the first time in four years. They reduced them 0.50%. There has been quite a bit of debate about whether or not they should have done this sooner. In my opinion, they were appropriately patient, and it paid off. In June of 2022 the consumer price index (CPI) hit a jaw dropping high of 9.1%. This month the CPI came in at 2.5% i, that’s an enormous drop in over two years. It seems to have worked by keeping the Fed Funds rate at 5.50% for so long.

So now what? Will the Fed drop rates more? How could this potentially affect the stock market? I am glad you asked….these are both very good questions. I did a little research project to see if I could get some insight about what could be up ahead.

Going back 43 years to 1981, I hunted down the information to these three questions:

1. How many times, since 1981, did the Fed begin a rate reduction campaign.
2. How many times did they reduce interest rates more than once during these campaigns.
3. How did the S&P 500 perform 12 months after the initial rate reduction of each campaign

Here’s what I found. Not counting last week, the Fed had 14 rate reduction campaigns since January of 1981. Of those 14, they reduced interest rates, more than once during 13 of them. In other words, only once did they just reduce rates one time.ii

Looking at the S&P 500 twelve months after each of these 14 campaigns started, gives us some additional information to process. The average performance for the following twelve months is approximately 15%. There were only 2 campaigns were there was a negative 12 month performance. The first one was in 2001 and the second one was in 2008. Basically 12 of the 14 campaigns had positive returns.iii Not too bad….

Consequently, there are a couple Wall Street sayings that come to mind. The first one is “Past performance is not indicative of future results.” The second one is “Don’t fight the Fed.” In other words, if the Fed is going trying to accomplish something be with them not against them.

As always, I enjoy interacting with you! Feel free to contact me with any thoughts and questions. You can email or call me…my phone is with me all the time. I look forward to speaking with you soon!

Michael

Michael S. Lewis

President, Wealth Manager

Anchor Wealth Management

358 NW 1^st Ave, Suite 2, Canby OR 97013

(503) 910-1687

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www.anchorwealthmanage.com

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC (finra.org/sipc.org)

Content in this material is for general information only and not intended to provide specific advice or recommendation for any individual. All performance referenced is historical and is no guarantee of future results. All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Sources:

i Federal Reserve

ii Federal Reserve

iii Thomson One