Wall Street is feeling a rare sort of pain, yet our interest-rate superheroes at the Federal Reserve aren’t taking action. Since December, the Fed has been adamant about keeping interest rates relatively high as tariffs work their way through the economy and to our wallets. Don’t wait for the Fed to save you, advises Callie Cox, chief market strategist at Ritholtz Wealth Management.
Not even stifling tariffs or a global bond market panic has made Fed chair Jay Powell flinch. And everybody feels the absence. But the Fed is clearly worried about stagflation – the term for an economy in which unemployment is rising, prices are increasing, and output is stagnant or shrinking. It is one of the deepest economic trenches you can fall into. Everybody falls behind.
Luckily, actual stagflation is exceedingly rare. I’m talking like four quarters in the last 55 years rare.
But we are inching closer to stagflation, even if we’re not there yet. So, as you can imagine, your Fed friends are stressing out. Lower interest rates to help the job market, and you risk prices spiraling out of control. Increase interest rates to nip dangerous inflation in the bud, and you risk toppling the nation into mass unemployment. It’s a tricky situation.
So, the Fed has decided to do nothing. Wait it out to see if one crisis neutralizes the other. And people are worried – from your street to Wall Street.
I wish I could give you the sweet reassurance that rate cuts are coming. But I can't. No one can. You may feel Powell’s absence not just in the markets, but in your own money. When the Fed and Congress stay on the sidelines, the policy safety net we assume is there starts to unravel.
Add in the fact that traditional portfolio parachutes (like long-term Treasuries) aren’t offering the same protection — and you’re left absorbing the full shock of stock and bond markets. Bigger ups. Bigger downs. Less shelter.
But you’re not powerless. Take advantage of sweet savings rates. Look for other portfolio cushions. Build a rock-solid investing plan you can trust through wild swings. Remember that your window of opportunity could be open to buy in at low prices.
Don’t wait for the Fed to save you. You have enough knowledge to save yourself.
