MFA Musings: 8/5/19
Introductions and the FOMC.
Before the weekly update, I would like to introduce our new team members in our Los Angeles, California office:
Mr. Dan Frilot
Dan is a Senior Consultant on the ALM Team at McQueen Financial Advisors in California. Dan has over 30 years of experience in the financial services industry, including 25 years working directly with financial institutions. Prior to joining McQueen Financial Advisors, Dan was Senior Vice President at Balance Sheet Solutions, LLC where he was responsible for leading the Asset-Liability Management (ALM) Risk group which included comprehensive ALM modeling, consulting and education services for clients nationwide.
Mr. Bill Verret
Bill is a Senior Consultant at McQueen Financial Advisors in California. Bill is responsible for working with clients to analyze their balance sheets and identify areas of asset-liability management (ALM) risk and opportunity. Bill has more than 20 years of experience in the financial services industry. Prior to joining McQueen Financial Advisors, Bill was a Senior ALM Consultant with Balance Sheet Solutions. Bill has conducted ALCO training and presentations for credit union boards and leadership teams.
The FOMC decision to lower the Federal Funds rate is similar to that of their last cut in 2008, in that it was primarily attributed to their concerns of lower inflation. However, unlike 2008, the stock market and employment are currently at all-time highs. The decision to lower short-term borrowing rates is an attempt to keep the longest-lasting expansion in history alive and insulate the U.S. economy from a global growth slowdown.
The announcement comes after last week’s second-quarter 2019 annualized GDP figure was reported at 2.10%, which was higher than survey and lower than the first quarter reading of 3.1%. Additionally, the labor market remains tight. In May, which is the most recent data available, there were 7.3 million unfilled jobs. Current unemployment is 3.7%, and for the 15th month in a row, there are more job openings than unemployed workers.
Current market expectations based on fed funds futures are for the Fed to cut rates again as early as the September 18th meeting and again in December, for a total of 3 cuts in 2019. We have difficulty believing that the Fed will follow through with three rate cuts by year-end. We feel this way because we have to remember that the FOMC was raising interest rates to normalize rates. They were not raising rates to curb inflation or to slow down an overheated economy. We really did not have a high risk of inflation.
Contact your MFA advisor to discuss ways to grow profitability with an inverted yield curve. All of us at McQueen Financial are dedicated to your long-term success.
Have a great week!