Dear Towerpoint,


An entertaining hashtag on Twitter, #ImOldEnoughToRememberWhen, has been trending recently. Are you old enough to remember when this was the price of food at McDonalds?




We also couldn't resist including this one:




Yesterday, the U.S. Federal Reserve, led by Chair Jerome Powell, cut short-term interest rates by 1/4 percent, the first interest rate cut by the Fed since 2008. This came as a surprise to virtually no one, as Powell had been strongly signaling for months that the Fed was planning on doing so.


What we find interesting is not the rate cut itself, but the motivation behind it and the potential consequences of the Fed arguably deviating from its legal mandate. With the passage of the Federal Reserve Reform Act of 1977, the Fed was formally assigned a specific directive, commonly known as the "dual mandate," to pursue the following goals:


  1. Maximum employment
  2. Price stability and moderate long term interest rates (these two can effectively be treated as a single mandate)




The interesting part:


  1. Employment is maximized - the United States is currently at full employment, meaning unemployment here in the United States, currently 3.7% (!), has fallen to the lowest possible level that will not cause inflation.
  2. Price stability has (arguably) been achieved - the U.S. inflation rate is currently 1.6%!


And while there is little to suggest the U.S. economy and current business cycle are struggling (which would justify a rate cut), what we view as problematic is the fact that the Fed is supposed to act independently of any political agenda or influences. However, President Trump has been vociferous in advocating for rate cuts to further spur our economyIn addition to the political harm to its credibility, a more immediate risk for the Fed in cutting rates is that it could limit the central bank's arsenal in fighting the next recession, not if, but when it occurs.


At Towerpoint Wealth, we are old enough to remember (well, at least some of us, considering the TPW birthdays mentioned below) when the Fed lowered rates to ward off recession or when it saw substantial risks of an economic downturn. We believe, at least as of today, that the probability of either scenario is low.


What is more certain is that borrowing costs will come down (is it time for a refi of your home or student loan?), and interest earned on savings and money market accounts will decline.


Does any of this make sense to you? It certainly is complicated. At Towerpoint Wealth, we philosophically believe it is better to adapt to the future rather than trying to predict it. In lieu of trying to unpack all of this yourself, call or email us to discuss your circumstances further if you agree with this logic.


Birthdays at Towerpoint Wealth!


The Towerpoint Wealth family celebrated two birthdays this past week: The crew helped our Director of Tax and Financial Planning, Steve Pitchford, turn 32 by enjoying a breakfast of some hot and fresh Buffalo Breakfast Pizza. Our Partner - Wealth Advisor, Jonathan LaTurner, turned 35, and in the image below is flanked by President Joseph Eschleman's two children, Henry and Josephine, during a small party the guest of honors home.


 


If you would like a quick laugh, click HERE to watch a short video of Steve getting embarrassed while being serenaded by his TPW family for his birthday!


In addition to rate cuts and pizza parties, a number of trending and notable events have occurred over the past two weeks:

Lastly, please take three or four minutes to review the curated content found below, highlighted by:

  • An on-site visit to Towerpoint Wealth by First Trust bond portfolio manager Nick Novosad
  • A well-assembled article discussing planning strategies that can help to reduce the tax consequences of IRA and 401(k) accounts
  • An excellent non-partisan analysis of the upcoming 2020 U.S. presidential election cycle

As always, we encourage you to reach out to us (info@towerpointwealth.com) with any questions, concerns, or needs you may have. The world continues to be an extremely complicated place, we are here for you, and look forward to connecting with, helping, and being a direct, fully independent, and objective expert financial resource for you.


- Joseph, Jonathan, and the entire Towerpoint Wealth team


 
 
 
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