The stock market responded positively to the Federal Reserve’s increase in the short-term Fed Funds rate. Major banks followed the Fed’s action by increasing their prime lending rate from 6.75 to 7 percent. The Fed increase seemed to provide an opportunity for them to increase revenue on a variety of variable rate products, which may lead to higher borrowing costs for consumers with those kinds of loans.
A recent survey of economists demonstrated expectations for continued mortgage rates in the 6.6% range. Mortgage rates hit 6.97% the other day, the highest level since early 2025.
In a possible reaction to inflation and other concerns, more investors pulled money out of stock funds than was invested, with much of this happening BEFORE the Fed’s action. It is a familiar pattern during periods of greater uncertainty but is not usually the best approach for prudent investors.
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We can only speculate about the reasons for the fund outflows, but history and our own experience tell us that some of it reflects attempts by investors to time the ups and downs of the markets.
Times like this often encourage investors to do exactly the wrong thing: become more cautious after prices have fallen and more adventurous when prices have risen.
There are certainly times when portfolio changes make sense. If a major life event, change in income or overall financial situation, or new goal has arisen, we should discuss whether your existing portfolio remains appropriate for your needs.
Otherwise, we’ll let others focus on the headlines while we remain focused on your goals and the strategies designed to pursue them.
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Here are some other things that caught our attention:
- Secretariat’s amazing run took place 53 years ago, and he remains unmatched in horseracing achievement. Selective breeding, in an effort to outdo the great thoroughbred, may have eliminated the genetic diversity needed to make his better.
- Medicare Open Enrollment is from October 15-December 7. Even if you like your current coverage, this is a great time to review premiums and plan provisions.
- The surface of the moon continues to change, as shown by the massive crater formed by a large object that collided with the moon in 2024. The new feature is more than 2 football fields wide and many stories deep!