It’s not the news everyone wanted to hear, but it wasn’t news most weren’t expecting. The Federal Reserve recently concluded its latest meeting and stated what most expected: there would be no new rate cuts in the federal funds rate. However, there was a positive note, such as it was: rate increases were pretty much done with as well. As a result, the SPDR S&P 500 ETF Trust (SPY) fell fractionally in Wednesday afternoon’s trading.
Essentially, the Fed said what a lot of people figured it would, though not what those same people hoped it would. Cuts were out of the picture for right now, but so too were hikes, and the current rate would be the new normal while its impact on inflation is properly observed. Inflation is still well above the target rate of 2%—as pretty much anyone who’s been to a grocery store lately will readily tell you—and as such, lowering rates wasn’t really an option. However, it offered a slate of factors that would be part of any future policy “adjustments.”
Just a Bit Too Soon
Reports note that the Fed likes what it sees so far, noting that core prices were only up 2.9% against this time last year, which was a slower rate of increase than was previously projected for the month. And if that keeps up, rate cuts might well start with the next Fed meeting. Certainly, rate cuts will have to be on the schedule at some point because anything with an adjustable rate—from mortgages to credit card debt to, yes, even the national debt—gets a lot more expensive to service when rates are high.
That’s eventually going to cripple the economy, and given the state it’s in right now, that’s not a route anyone wants to take. So, the Fed right now is on a tightrope, trying to drop inflation but not set the whole system on fire in the process.
Is the SPY ETF a Good Investment Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on the SPY ETF based on 390 Buys, 104 Holds, and 10 Sells assigned in the past three months, as indicated by the graphic below. After a 21.31% rally in its share price over the past year, the average SPY price target of $532.34 per share implies 9.53% upside potential.
