Today the Federal Reserve cut the federal funds rate 50 basis points to a new rate of 3%, the lowest since 2005. Personally, I think it is an overreaction, but I do like that the fed has remained proactive under Bernanke.
This doesn’t mean a lot for the average person, though if you are looking for a new mortgage you will likely see better rates soon. It does make holding cash less attractive, but I don’t have any cash ‘investments’ so it doesn’t matter much to me. I would like to look at maybe getting a better mortgage rate, but my credit is pretty weak right now so it may be too soon for that anyway.
In spite of the fear-inspired naysayers, there was no conclusive evidence that we were headed for a recession. However, with these rate cuts and the proposed stimulus package it would be really hard for me to believe that we will see a recession at all. On the other hand, we may already have entered a recession, the data lags behind and can be revised after the fact (FYI- a recession is defined as negative GDP growth for 2 quarters). Yes, that is confusing and a good reason why I don’t concern myself with macro economic factors. I am taking care of my budget, working to eliminate my debt, earn more income, and dealing with things that I can affect rather than becoming fearful of things that are not in my control.
If you are holding cash on the sidelines, this is probably a good time to start moving it into the market. I definitely would if I wasn’t focused on my debt.