Will Interest Rate Cuts by the Fed Impact Bond Portfolios?
At the end of August, the Bureau of Economic Analysis released new personal consumption expenditures index data showing that inflation has likely slowed enough for the Federal Open Market Committee (FOMC) to cut interest rates at next week’s highly anticipated meeting.
Now, many investors may be wondering whether they should adjust their bond allocations depending on the timing and pace of the expected rate cuts. Our research shows that it’s difficult to draw actionable conclusions from Fed watching. Per Exhibit 1, evidence shows that bond markets may move ahead of the Fed because markets continually process information that might factor into Fed decisions.