Fed Raises Rates 12-0: What the Dot Plot Means for Your Money

I'm Mike Milligan, Certified Financial Planning Professional, founder of One Oak Financial. This is the One of a Kind Financial Show Daily. Educate, coach, plan is my mission. Never miss a moment is my motto.

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2 o'clock yesterday, the Federal Reserve raised the federal funds target range by 25 basis points to 3.75% to 4%. First rate hike since July 2023. That's the headline. Read the vote though. 12 to 0. Not a split committee, not a squeaker, unanimous. That is Chairman Kevin Warsh delivering his first September meeting with a full committee behind him. That is a message. Read the dot plot. 12 of 18 members are calling for at least one more hike this year. That is— this is not a one and done. This is the start of a cycle. And then read the statement. 2 words, actually 3 words: inflation remains elevated. And there's one promise in that statement: the committee will deliver price stability. Now read the tape from yesterday. The S&P 500 for the day closed lower. It was down to 7,551, a 0.45% change. for the day. The Dow Jones Industrial Index down 1.21%, and the NASDAQ down just a little, down 0.01%. Technology actually performed better in light of this Fed statement. The Russell 2000 closed 2,858.81, off about 0.4%, and the VIX ticked up to 17.53 to 17.20. That's It's up about 1.9%. The Dow took a hit, tech held, small caps kept bleeding. This is not panic though, guys. This is the market absorbing exactly what it priced in and interpreting what the Fed's next moves will be.

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Here's what I do not want you to miss. The rate hike was priced in. 92% probability going into 2 o'clock yesterday. The market did not react to the hike. The market reacted to the dot plot. So here's the one-of-a-kind move. If you own a variable rate loan, your payment just went up. Pull the statement, know the number. If you have cash sitting in the checking account, that cash is now costing you more than yesterday. Money market yields, short-term yields, and CD yields all move up slightly with the Fed. Cash on the sideline is not free. Folks, it is losing to inflation, and the Fed is telling you that they're trying to tame inflation, but it's not under control. If you're a retiree with a written plan, look at the income annuity page. Look at the guaranteed income slot. Look at what you need as a required return to be able to keep up with the cost of living. The re-quote in December may be materially better than the quote in June. This is a planning trigger—time to reach into your advisor. And find out where it is. Not to panic though, it's just a trigger. And if you're a financial planning pro listening, this is the week your clients want a plan review. They want to hear from you. Communication is important, not a market prediction. A written plan that answers the question they are actually asking: does the Fed hike change my plan? The answer is usually no, but the conversation is always yes. We're not chasing returns, folks. We're building a one-of-a-kind financial plan.

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Without the memory, September 17th, 2001, the morning after, uh, the morning that the market woke back up after the towers fell, the New York Stock Exchange is closed for 4 trading days. That was the longest halt since 1933. Nobody knew what was going to happen when the opening bell rang. Here is what happened. The bell rang, trading opened, and the Dow Jones Industrial Average fell 684 points, closing at 6,000 or 8,927 points. That's down below 9,000 for the first time in nearly 2 and a half years at that point. The S&P fell 53 Fell 53.77 points, down 4.92% to 1,038.77. That was the largest single-day point loss in Dow history at the time. And you know what else happened that day? The Federal Reserve actually cut rates half a point, an emergency rate cut. Wall Street did not care. Wall Street sold anywhere. Here is the teach: the market did its job that day. It opened, it cleared trades, it absorbed grief and fear and forced selling, and it kept working. That is what a functioning market does. It processes. It does not agree with you. It does not comfort you. It just processes. The people who had written a plan on September 10th, 2001 still had a written plan on September September 17th. The number on the page changed. The plan did not. The Dow closed 2001 down about 7% for the year, then took another 23% hit in 2002. Then the rebuild began. Every point it lost and then some. Anyone who sold on September 17th and stayed out missed the largest wealth rebuild of really the next 20 years. The lesson from 9/7/2001 and the lesson from 9/16/2026 are the same. The headline is not the plan. The plan is the plan.

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12-0, 684, 2 dates, 25 years apart, both proving the same thing. The written plan beats the headline every single time. Never miss a moment, folks. That includes today, especially today. I'm Mike Milligan, Certified Financial Planning Professional at One Oak Financial. Text your questions to me by reaching out to 600-7400 and putting the word ideas. It'll open up a communication line, and then we can begin dealing with the questions you have. Don't forget also to grab the Retirement Handshake on Amazon. My new book talking about how your silent partner can be written away from your future tax bill. Educate, Coach, Plan. Never miss a moment. The Mortimer Collins Financial Show Daily is for educational purposes only. This is not investment, tax, or legal advice. Individual product mention including annuities, CDs, money markets, treasury securities, and mortgage products illustrated do not constitute a recommendation. Consult your own advisor and read all product disclosures before making any decisions. Rate levels, index levels, and historical returns cited are a point in time and subject to change. Past performance is not indicative of future results. I'm Mike Milligan, Certified Financial Planning Professional and Chairman of One Oak Financial. That's the One Oak Planning Financial Show for September 17th.

Be one of a kind with Mike's plan. In a face shot growth, take a stand. Visibility strategy, take the lead. Transformation's yours, fulfill the need. Mike's got the way to help you. You rise and stay. Leadership impact you'll find in your one-of-a-kind mind. Be one of a kind. Take the flight. Ooh, ooh, ooh, ooh, ooh. Mike's the guide. You'll shine bright.