what's up you guys it's Graham here and I hope you're prepared for what just happened as of a few hours ago for the first time since March of 2020 the Federal Reserve has finally made the decision to lower interest rates after one of the most aggressive tightening Cycles in history that's right without exaggeration this single decision sets a brand new trajectory that not only confirms that the Federal Reserve believes inflation is over but it's about to affect everything from the stock market the housing market the national debt and even how much you get paid within a savings account no joke if you have any amount of money stashed away whatsoever this is going to directly impact you almost immediately that's why we really have to discuss exactly what the Federal Reserve just said the impact this is about to have on all things money what history tells us is most likely to happen next and then most importantly how you could use this information to profit although before we start as usual if you appreciate me trying to frantically edit all of this together to give you the most upto-date information it would mean the world to me if you hit the like button or subscribed if you haven't done that already doing that is totally free it takes you a split second and as a thank you for doing that I'll do my best to reply to as many comments as I can so thanks so much and also big thank you to policy genius for sponsoring today's video but more on that later all right so in terms of why the Federal Reserve finally felt comfortable lowering interest rates as well as how low these interest rates could possibly go all of this comes down to the recent inflation report now even though consumer prices have risen across the board by an average of 21. 2% since February of 2020 there is some good news in the fact that recently price prices have begun to come back down which has given the Federal Reserve some room to begin cutting interest rates before the entire economy goes to okay in all seriousness as far as where consumer prices are headed it was recently reported that inflation only Rose by 2% in August which was the lowest level since February of 2021 this effectively puts the 12- Monon inflation rate at just 25% with energy being one of the main culprit having fallen 4% on top of that used cars and trucks have declined 10% new vehicles are down 1. 2% and oil is down 12.
1% over a year however the only sticking point here is that core inflation which excludes food and energy is pretty much unchanged from the last month at 3. 2% all because housing remains incredibly high at a 5. 2% increase over the last year of course in this case housing is seen as a lagging indicator because the prices that we see today are often the result of data that was signed a year ago but this could be a reason why some people don't see as big of a rate cut as they would have liked on top of that we have another metric that greatly contributes to the federal reserve's decision to lower interest rates and that would be the jobs market look here's the thing the federal reserve's entire objective is to Simply support the goals of Maximum employment and stable prices which is a really fancy way of saying they're going to do everything within their power to make sure the cost of goods and services doesn't Skyrocket out of control without ruining everyone's lives in the process of course when it comes to that one of the metrics they look at is the jobs Market because this signals how many people are employed how many jobs are available and If wages are strong enough to support the average person however as it turns out their recent interest rate hikes have been enough to result in the fewest jobs available since January of 2021 in addition to that August payrolls also saw their smallest gain in 3 years confirming that hiring has slowed down significantly this means that most likely the Federal Reserve has reached the maximum that they're willing to push and everything from here on out is simply about not screwing it up but in terms of where things get really interesting we got to talk about the stock market when it comes to this there is one single question that every investor wants to know is the stock market going to go up or down as the Federal Reserve Cuts rates after all in theory when rates are lower businesses could borrow for Less growth expands and your mem stock portfolio returns to levels you haven't seen since 2021 but plenty of charts show the opposite where nearly every single time the FED Cuts rates the stock market plummets by an average of more than 20% so what's actually true well historic the Federal Reserve hasn't dropped rates unless they absolutely need to like they don't just say hey so that Japan stuff kind of spooked the market a little bit so here's a rate cut to get your profits back instead they usually drop rates in anticipation of events that could be really bad for the economy almost as a way to help soften the blow and this has been the case throughout the last three recessions like in 2001 they lowered rates before the dotom bubble in 2008 they lowered rates during the Great Recession and in 2020 they lowered rates before everything shut down almost as though they knew what was going to happen before the rest of us did but you know what that's besides the point anyway in these cases the market drop wasn't due to the rate cuts themselves but rather the events that led to the rate Cuts being necessary so in this case is a rate cut going to lead to a stock market sell-off drum roll the answer is it depends on the one hand since the stock market is always Forward Thinking the stock market could sell off since rate Cuts Like This are already priced in for instance one of investing.
com analysis made the argument that investors front run and anticipate any rate hikes or cuts that may come up and therefore where the market is trading at today already takes this into account they also made the argument that the Federal Reserve is somewhat trained investors to the point where if things get really bad investors know that the FED is always going to step in to save the day or as they say any Financial or recessionary event jeopardizing the markets would be met with rate cuts and accommodative policy for many investors in the markets today their entire investing experience consists of continual interventions by the Federal Reserve that's why the market has so far only gone higher but in terms of rate cuts of the past and previous downturns there's an answer to that for the most part the Federal Reserve started cutting rates due to the onset of a recession a bare Market or a financial event at that point as shown on screen the markets are aicing for lower expectations of earnings growth rates and profitability or basically in terms of what's most likely to happen history tells us that it all depends on whether or not we see a recession which also means that rate Cuts make less of a difference than we think it does compared to the overall health of the economy this also means that everything we're seeing today is most likely already priced in unless of course there's a looming disastrous event the Federal Reserve is trying to get ahead of but is this the same for the housing market although before we go on that at the end of the day the goal is really just about improving your financial future after all things happen all the time that's outside of your control like you can't predict what the Federal deserve is going to do you have no idea how the stock market is going to perform in the short term and health is something that almost all of us take for granted like when it comes to that last part nearly half of Americans expect that if they passed away today their loved ones would inherit their debt and 41% don't have the life insurance coverage they need which is why our sponsor policy genius is there to help for those una aware policy genius is the country's leading online insurance Marketplace making it easy to compare life insurance quotes from America's Top insurers in just a few clicks to find your lowest price on top of that their team of licensed award-winning agents work for you and not the insurance company so they don't have any incentive to recommend one insurer over the other and they could help you find the policy that best fits your needs not to mention they could walk you through the entire process step by step handle all paperwork answer any questions you have and help you make decisions with confidence with thousands of five-star reviews on Google and trust pilot in fact with policy genius you could find life insurance policies that start at just $292 a year for a million dollar of coverage some options are 100% online and avoid any unnecessary medical exams so check life insurance off your to-do list in no time with policy genius just head to policygenius. com or click the link in the description to get multiple life insurance quotes for free and see how much you could save thank you so much enjoy and now let's get back to the video all right so before we discuss the federal reserve's latest statements and what they anticipate happening in the markets let's discuss the topic that everyone is wondering about housing prices at a first glance there's the concern that lower interest rates are going to spark more demand for cheaper mortgages because buyers monthly payments go down buyers could afford to pay more and that intern will cause more demand for housing causing prices to spike back up especially when home affordability is at a record low however even though prices are still hovering your all-time highs the good news for buyers is that prices are starting to get cut for example a recent report found that the share of available listings that saw a price cut in July Rose to18 . 9% causing the median price to fall from 445,000 to 439,000 why well realor.
com says that there are two reasons for this first mortgage rates remain higher than expected causing less buyer demand and two a lot of w be buyers are sitting on the sidelines waiting for interest rates to come back down causing sellers to reduce their asking prices to entice them back but what happens when interest rates begin coming back down well in terms of mortgage rates the realtor. com Chief Economist seems to think that a 25 or 50 basis point rate cut isn't going to be that big of a difference and it's going to take something much more significant for the average buyer to begin to notice like just for context it said that a 1% decrease in mortgage rates would allow for an additional 5 million buyers to qualify but the mortgages we're likely to see are only going to be reduced from 6. 47% to 6.
3% with the recent cut that's because mortgages are mainly priced based on the 10year treasury yield plus an additional 2 to 3% so that Banks make a little bit of profit and as you could see these rates are pretty much even from what we saw a year ago on top of that it's said that roughly 86% of outstanding mortgages of a rate of 6% or below meaning rates are going to need to continue trending lower to see a fully re-energized housing market in such a way that would entice homeowners to sell after all who would want to give up a 3% mortgage just to buy another home at 6% basically it's presumed that the Federal Reserve is looking for just the right spot to be able to cut rates enough to keep our economy afloat but not so much that it floods the market with excess demand sends prices back up again that's why for buyers this First Rate cut isn't going to have that large of an impact but it is going to lead to the choice of buying a house at higher rates with less competition or buying a house with lower rates but more competition really at the end of the day housing prices take some time to be able to fully react and any changes are going to take time to materialize but in terms of where prices are headed in the future The Mortgage Bankers asso iation believes that prices will increase another 2. 9% in 2025 Fanny May believes we could see prices rise 3% and na estimates that prices could increase by another 2% in terms of rental prices though that's another story entirely new data found that one in three property managers offered a concession on rents amid a glut of Supply that's right multif family construction is on the rise with more units completed in June than any other month in nearly 50 years however even though 30% of properties are giving out freebies the rest are still going up with rental prices now 3. 4% higher than they were a year ago with 4.
7% being the increase on single family homes and 2.
