The Fed showed they are ready to fight today with a 50bps cut to interest rates. There’s going to be a lot of talk about what this means for markets, the economy, the housing market, etc. Most of the folks talking have no clue what they’re blabbing about. And most will be wrong.
The truth is nobody knows what it will mean. Mortgage rates will go lower, sure. But will that continue to spur demand for housing? It’s not a guarantee.
Here’s what we do know: The Fed is ready to fight. And there’s an old saying, “don’t fight the fed”.
The trickier pundits will tell you that with interest rates so low the Fed doesn’t “have any bullets left”. This is usually followed with something along the lines of, “should we go into a recession”.
This sounds smart, and it’s attractive because it will make you sound smart when you regurgitate it.
But the depth of the Fed’s pockets is literally unlimited, and they’ve shown that at any slight hint of trouble or standard correction in asset prices, they’re willing to step in. They’ve proven that in the past, and today’s move only reiterates that agenda holds true still.
Today it was an aggressive “emergency” rate cut. Next time it could be any number of things. What it is doesn’t matter as much as the fact that they’re willing to do whatever it takes to keep markets stable and grinding higher.
Don’t fight it. Enjoy the easy money, lower mortgage rates, and ballooning 401(k)’s. Eventually it will get ugly, but I have a feeling this goes on much, much longer.