The Fed Is About to Raise Rates. Is Your Financial Plan Ready?

It's the One of a Kind Financial Show Daily. I'm Mike Milligan, your host. It's Tuesday, September 15th. The Fed meeting kicks off today, uh, rate decision Wednesday afternoon. Yesterday, the markets pulled back, a red open to the week ahead of what could be the first rate hike in a while. 25 years ago today, the country was in a Saturday of stunned silence, and it's a big birthday day, so we'll get to some shoutouts at the end of today's show. If you're a financial planning professional listening, this episode is the one you send to your clients this morning because you care. Fed context, the tape data from yesterday, and the one-of-a-kind lens on both. Educate, coach, plan is my mission. Never miss a moment's my motto. On Monday, September 14th, it was red across the board. Every major index closed lower ahead of the Fed. The Dow Jones Industrial Average down 0.29%. The S&P 500 down 0.48%. The NASDAQ Components down 0.56%. The Russell 2000 down 0.40%. As a reminder, all indexes are positive year to date. The NASDAQ led lower for the second— for, uh, for to begin the week, and that continues the pattern we flagged last week. where it was volume-driven. Institutions still are not putting fresh dollars into the NASDAQ the way they are putting them into the S&P 500 and small caps. The VIX, or volatility index, told the real story on Monday. The VIX closed at 17.10. That was up 7.95% from Friday's close of 15.84. That is a meaningful jump in one session. Fear is coming back into the tape ahead of Wednesday's decision. Protection is getting more expensive by the hour. When your clients ask what happened yesterday, do not say the market went down. Say the market repriced the Fed risk. Those are different sentences, and one of them is the actual truth. The tape yesterday was not about earnings. It's not about the consumer, one of our big thesis topics over the summer on the show. It was about traders positioning for the Federal Open Market Committee meeting that started today, that will start today.

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CNBC reported yesterday that the Fed funds futures traders are pricing a better than 92% probability of a quarter-point rate increase at Wednesday's Meaning, and they're pricing more than a 75% chance of another rate hike in December. Guys, those numbers are not a coin flip. 3 weeks ago, it was a coin flip, 50/50 that rates were going up. Today, the market is telling you it expects a hike. Why the shift in expectations? 4 things, a simple list. One, August CPI, the Consumer Price Index. It was released on Friday. The headline inflation was at 3.4%, core inflation at 2.4%. That was down a tenth of a percent from July. It's getting closer to the Fed's 2% target, but not there. It's still above it. Number 2, fuel prices. There's been another run-up in gasoline and oil. Jim Cramer talked about $100 oil the week before last on his show that we reported here on the One of a Kind Financial Show Daily. That is not flowing into the CPI data yet, but it's coming. Third, the Iran energy supply shock. The war has meaningfully disrupted global oil supply. That is a real driver, not a headline story. And then finally, AI demand. Yes, really. The energy demand and CapEx from the AI buildout is now showing up in the inflation numbers as a demand-side pressure. Nvidia's chips are running on electricity. Data centers need power. That is inflation. The current Fed funds rate is 3.5% to 3.75%. If they hike a quarter, it goes to 3.75% to 4%. That is not restrictive by historical standards, but directionally it is the wrong way for stock market bulls and the right way for fixed income buyers. And this is Kevin Warsh's, the Fed chair's, first big test. Warsh is expected to support a rate hike based on his Jackson Hole comments last month. The July FOMC voted 9 to 3 to hold rates steady. The 3 dissenters wanted a quarter-point hike then. So the ground shifted from July to now. If you have a client, like we do at WinOak Financial, who's maybe been sitting in cash waiting for a signal, this week could be that signal. If you have a client who has been dragging their feet on Roth conversions, a hiking Fed means rates on cash and bonds could go up, which changes the Roth conversation math on the tax side. If you have a client with variable rate debt, hiking Fed means the debt gets more expensive. The written plan should already contemplate all 3 scenarios. If it does not, that is a Wednesday afternoon phone call to make this week, because a written financial plan is a philosophy document that addresses what you do when there's a point in time where a decision needs to be made.

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25 years ago today was Saturday, September 15th, 2001, 4 days after 9/11. There was no college football games that Saturday. The Big 12 and the SEC had reversed courses 2 days earlier. Every game on the slate canceled. There was no Major League Baseball. Every game postponed. There was no NFL that Sunday. What America was doing on Saturday, September 15th, 2001, Watching television coverage that still had no answers, standing in line at blood drives that did not need any more blood. They were getting ready to attend funerals for firefighters and police officers whose bodies were still being found, sitting in living rooms across America with family members who had flown in from out of state because nobody wanted to be alone. See, there was There was also a market question sitting in the background that nobody wanted to answer yet. When would Wall Street reopen? What would happen when it did? The Chicago Board of Trade had already announced it would reopen on Monday. The New York Stock Exchange was working toward the same, but nobody knew what the tape would do when the bell rang after those towers came crumbling down. Every client has a moment in their life like the country had on September 15th, 2001, a weekend of stunned silence, a funeral, a diagnosis, a phone call from a hospital, the moment where the world stops and the questions have no answers yet. Your written financial plan is the only thing that survives those weekends intact. Every other tool your client has, the account statement, The projection software, the market outlook is useless in the weekend of the phone call. The written one-of-a-kind financial plan is the only thing on the shelf that still makes sense the Monday after the calm of a Saturday that has no answers, because the plan was built when your client was thinking clearly, like on September 10th, and it can carry them when they cannot. The written financial plan is the only thing that survives the weekend phone call. Build the plan before the phone rings.

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September 15th is a big birthday day. Let's do some shoutouts. Agatha Christie, born September 15th, 1890, the British author who created her Miss Marple, the bestselling novelist of all time, over 2 billion books sold. She wrote plans on the page and left clues in every one of them. Sounds a little bit like the profession we're in, right? Tommy Lee Jones, born September 15th, 1946. Man, who knew he was that old? Oscar winner, The Fugitive, Men in Black, No Country for Old Men, 80 years old today and still working. Tom Hardy, born September 15th, 1977. He's not going to be 50 in a couple of weeks. He's still got a year in a couple of weeks. English actor in Inception, Mad Max: Fury Road, Peaky Blinders, one of the most versatile actors of this generation. And then Prince Harry, born September 15th, 1984, the Duke of Sussex, charitable work, military service, 42 years old today. And there's 2 cultural moments worth noting on September 15th. LA Law premiered on NBC in 1986, the legal drama that defined lawyer television for a decade and set the template for every workplace ensemble show that came after. And in 1998, Marilyn Manson released Mechanical Animals, the concept album that shifted his sound and became a defining artifact of the late '90s alternative culture. Why in the world am I talking about this on the show today? Because every one of those birthdays and every one of these releases is a date somebody remembers. Agatha Christie's estate is still generating royalties 50 years after her death because a written body of work compounds forever. Tommy Lee Jones is still working at 80 because he built a career worth continuing. Prince Harry, 42 today, is right in the middle of the peak earning window when written planning matters most. Every date matters to somebody. Your job as an advisor, your job as a client is to know which dates matter to you in your life. That is what one of a kind literally means.

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Here's the takeaway for the day, guys. Yesterday, the tape reflected, um, and repriced the Fed risk. Every major index was down, the VIX up nearly 8%. Wednesday afternoon, the Federal Reserve is expected to raise the Fed funds rate a quarter of a point, 92% probability. Your written plan should already contemplate a hiking Fed. If it does not, You have 48 hours to make it right. We're not chasing returns as much as we're building a one-of-a-kind financial plan. That plan is what carries your clients and you through the weekend of the phone call. The plan is what compounds Agatha Christie's royalties. That plan is what survives every Fed decision, every recession, every rally, every crisis. Text the word ideas, I-D-E-A-S, to the number 600-700- Or just reach directly into the office, 757-909-7151. Happy birthday to anybody listening born on September 15th. Comment your age below if that's you. We'll give you a shout out tomorrow. Estoy aprendiendo. That means I am learning. Hopefully this show is teaching you something also. I'm Mike Milligan, Certified Financial Planning Professional. I'll see you tomorrow. This program is for educational purposes only and does not constitute investment, tax, or legal advice. I am a Certified Financial Planning Professional. All market data referenced is from publicly available sources as of the trading date noted. Past performance is not indicative of future results. The Federal Reserve policy expectations, including CME FedWatch probabilities cited in this program, reflect market implied pricing at the time of the recording and are subject to change. The One of a Kind Financial Plan is a service mark and registered trademark of Mike Milligan, LLC. Consult your own licensed financial professional before making financial decisions based on any information discussed on this program.

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