Quarter 3 2024 Financial Update
Authored by Koby Glazier New Millennium Group
The Federal Reserve Bank (Fed), as the central bank of the United States, plays a pivotal role in shaping monetary policy and overseeing the country’s financial system. On September 18, 2024, the Fed made a noteworthy decision, reducing the Federal Funds rate by 0.5%, bringing the target range down to 4.75%–5.0%. This marks the first rate cut after more than a year of maintaining interest rates at 5.25%–5.50%, following 11 consecutive rate hikes aimed at combating inflation.
The Federal Funds rate is fundamental to the U.S. financial system. It represents the interest rate at which commercial banks lend reserves to each other overnight. Any adjustment to this rate has wide-reaching effects on various consumer loan rates, including home mortgages, auto loans, and credit cards. As a result, this recent rate cut is particularly impactful for consumers, as it could lead to lower borrowing costs, encouraging increased spending.
This policy shift comes at a critical time, just ahead of the upcoming federal elections on November 5, 2024, and with the Fed's next policy meeting set for November 7-8, 2024. By easing monetary policy, the Fed seems focused on supporting the economy amid growing concerns about a weakening labor market, a vital component of the nation’s economic health.
As these developments unfold, market analysts are keenly watching the potential effects on the equity markets. In a recent interview with Bloomberg, Lori Calasina, Head of U.S.
Equity Strategy at RBC, shared her projections for the S&P 500. Based on conservative earnings forecasts, her model suggests that the S&P 500 could reach approximately 6,200 by the end of 2025. If consensus earnings projections are factored in, the index might even rise to around 6,500.
The current economic environment appears to be favorable as we look toward 2025. Should the Fed continue on its path of lowering interest rates, this policy stance may further strengthen the labor market and spur economic growth.
At New Millennium Group, we are closely monitoring these macroeconomic trends and their impact on our clients’ financial well-being. Our commitment is to help clients navigate the evolving economic landscape by providing timely insights and strategic guidance. As we move forward, staying attuned to the macroeconomic environment will be crucial in achieving long-term financial success.