All eyes on the Fed

Macroeconomic update for September 2024

US Federal Reserve Chair Jerome Powell’s recent statement that “the time has come for policy to adjust” marks a shift that financial markets have eagerly been anticipating, following similar moves by other central banks like the Swiss National Bank and the European Central Bank. It comes amid a weakening US labor market, with rising unemployment stoking recession fears. In this context, what is the Multi Asset team’s take, and how are they approaching asset allocation?

Key Takeaways

1. The need for Fed cuts
   We believe that the weakness in the US labor market, combined with normalizing inflation rates, makes interest-rate cuts not just possible, but necessary.
2. Clear message from Fed Chair Jerome Powell
   His speech at the annual Jackson Hole conference sent a clear message: “The time has come for policy to adjust. The direction of travel is clear.”
3. Buying the dip
   We took advantage of the market correction in early August to bring our equity allocation back to target. Stocks have since rebounded. Looser central bank policy is typically positive for risky assets.

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