Answers to Your Burning Financial Questions (2024 Edition)

Oct 22 2024 | Back to Blog List

The questions keep coming here at Cedar Point Capital Partners—and we really wouldn’t have it any other way.

It’s a sign that our clients are actively engaged with their financial plans, and focused on making smart moves based on facts and evidence, rather than fads or the media.

Your questions also give us the motivation to write a new installment in this ask-us-anything series, Answers to Your Burning Financial Questions. Below, you’ll find three common questions we’ve been fielding in recent months, along with our (abbreviated) insights for your consideration.

Of course, your financial needs and situation are unique. If you’ve been pondering any of the questions we cover here, we encourage you to reach out for a more personalized discussion.

Q. Is the Federal Reserve done cutting interest rates?

This has been a popular point of discussion for many of our clients, from business owners trying to understand their future borrowing costs to fixed-income investors focused on bond performance. The good news (for some borrowers, at least) is that short-term interest rates are likely to keep falling in the months ahead—the real question is by how much.

Policymakers on the Federal Open Market Committee (FOMC) in September approved a ½ percentage point cut in the benchmark federal funds rate, pushing it back below 5% for the first time since May 2023.

With the labor market showing strength and inflation drifting back toward the Fed’s long-term target of 2%, some have suggested policymakers may already be done dropping rates, lest inflation rears its ugly head. But there is a growing consensus that we can expect a slow, steady drift lower as the factors that led to our recent inflation—the pandemic, government aid, and supply chain issues—fade into history.

The FOMC itself projected that interest rates will fall by another half of a percentage point by the end of 2024, and another full point over the course of 2025. If those projections play out as expected, that would put the Fed’s benchmark rate around 3.5% at the end of next year. Financial markets mirror that outlook, with most traders betting the Fed cuts rates by a 0.25 percentage point at its November and December meetings, according to Reuters, as of this writing.

Of course, this is all assuming that our economy continues to chug along steadily. While the Fed’s hoped-for “soft landing” may indeed be realized, that doesn’t exclude the impact of a global event that shocks our financial system. With conflict in Ukraine and the Middle East, and unsettled politics around the world, anything could happen.

Now more than ever, this all goes to show the importance of having a tailored financial plan that’s built to weather interest rates at any level.

Q. How will the election impact markets after it’s over?

If there’s a topic that triggers our clients’ anxiety more than the election right now, we haven’t found it. The presidential race remains incredibly tight heading into the final weeks, and each side seems to believe that the other candidate spells big trouble for the economy and their portfolio.

Our first piece of advice (and a topic we covered in last month’s Capital Insights video), is to take a deep breath. Know that the general resilience of our economy doesn’t generally rely on who is sitting in the White House—that comes down to fundamentals like inflation, interest rate, and labor market trends.

Generally speaking, the good thing about a presidential election in the U.S. is that it generally bodes well for markets, despite the volatility in the run-up to Election Day. History tells us that the S&P 500 has finished positive 83% of the time in election years since 1928, with an average return of 11.3%, regardless of who wins. Two of the three down years during an election came during periods of intense financial crisis (2000 and 2008).

The bigger question investors (and voters) should be asking isn’t about the near-term market reaction, but rather how their economic plans could impact our economic strength over time. Economists have noted that both candidates’ fiscal policies would significantly increase the national debt—by an estimated $7.5 trillion under President Trump and $3.5 trillion under Vice President Harris through 2035, according to the nonpartisan Committee for a Responsible Federal Budget. More debt is likely to put pressure on interest rates in the future, which will act as a lag on economic growth and hamper the government’s ability to respond to future crises.

Whatever your politics, we recommend keeping your economic perspective trained on the long-term impact of the candidates’ policies—just like your financial life plan.

Q. Should I be looking at alternative investments, like consumer goods or cryptocurrencies?

We addressed this topic from the perspective of gold and silver in last year’s edition, but a new study from Bank of America showing that millennial and Gen Z investors are more likely to hold alternative investments like art, sneakers and cryptocurrency has some of our older clients asking, “Do I need to be getting in on this?”

It’s a fair question. For many years, the avenues to amassing wealth were relatively straightforward—well-built portfolios of U.S. stocks and bonds, real estate investments, and maybe business ownership or equity in a company, held over a long period of time. With the hope of a big payday someday down the road, it has pushed many people—especially those who are younger or have fewer investable assets—toward these kinds of alternatives.

Our problem with many of these “investments” is that people don’t have insight into what it will take to realize a return on them. Sure, vintage sneakers or classic comic books are cool (really!), but if you’re approaching them as an investment of your hard-earned money, do you understand the dynamics of the market? Have you thought about how to protect those assets through physical and insurance means? What’s your exit strategy? Investment returns matter to your long-term financial legacy, so you can’t afford to be laissez-faire about the assets you choose.

We want to be clear: This is not to say you shouldn’t invest in Bitcoin or art or watches. A financial life plan without joy isn’t one you’ll stick with over the long-term. We just urge our clients to be clear-eyed and realistic about those investments, and to have an actionable strategy in place for managing them. Without that, it’s really just a hobby (which isn’t a bad thing, by the way).

Either way, we can help you sort out facts from fads, and devise an investment strategy that gets the most out of your assets.

What’s your burning financial question? We’re here to answer them all. Reach out to set up a time to talk, and let’s grow together.

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