What is happening with interest rates, investment markets, and the Federal Reserve? Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted in an Insurance NewsNet article—by Doug Bailey, “Fed raises rates by .75 point, largest jump since 1994”—regarding the Federal Reserve’s largest interest rate hike since 1994.
Below is the excerpted quote:
“I feel that today’s move is an admission from the Federal Reserve that it was too loose and generous with its monetary policy in 2021 and are trying to reverse that quickly,” said Michael Ashley Schulman, founding partner and Chief Investment Officer at Running Point Capital. “The fact that the Fed is putting another 75-basis-point hike on the table for its July meeting is hinting to the world that Chair Powell is willing to follow Paul Volcker’s inflation fighting playbook from the 1980’s that pushed America into recession. But then, as now, whether higher interest rates will break inflation or lower energy prices will break inflation is really the debate.”
Even more important than the numerical increase of the federal-funds rate today will be how investors interpret the Federal Reserve. Will the Fed’s statement and Chair Jerome Powell’s follow-on interviews instill confidence into the economy that the Fed can control inflation without pushing the U.S. into recession, or will an already skeptical audience further believe that the Fed has no control over the price of food and oil? If the U.S. enters a recession soon, it would be a most unusual recession: one with plentiful credit, low unemployment, and high inflation—noteworthy dynamics not normally associated with an economic slowdown.
Disclosure: The opinions expressed are those of Running Point Capital Advisors, LLC (Running Point) and are subject to change without notice. The opinions referenced are as of the date of publication, may be modified due to changes in the market or economic conditions, and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Running Point is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Running Point’s investment advisory services and fees can be found in its Form ADV Part 2, which is available upon request. RP-22-34