3 Things You Need to Know This Week | Fed Decision, US Retail Sales, Medicare

Transcript

Hello and welcome to Three Things You Need to Know This Week.

This regular series helps you cut through the financial headlines and focus on what really matters for markets. For more market insights, subscribe to our YouTube channel or visit FisherInvestments.com. And with that, here are three things you need to know this week.

First, US interest rates.

On Wednesday, the Federal Reserve Open Market Committee, or FOMC, will announce its September rate decision. Investors are watching closely to see whether policymakers hold the federal funds rate steady or adjust it. Expectations are mixed, although it appears that most investors expect a 25 basis point hike. Despite market expectations, Vice President JD Vance recently argued the Fed should cut rates even after recent strong jobs reports, which reignited the conversation about where monetary policy should go next. Regardless of your politics, remember the rate decisions come from the 12-member FOMC, not from elected officials. Comments from politicians make headlines, but they don't set the outcomes. The meeting is also likely to attract extra attention because investors aren't just focused on the rate decision itself. They'll be looking for clues about how Fed officials view inflation, economic growth and the overall direction of monetary policy. Yet history shows that trying to predict exactly what policymakers will do next can be a frustrating exercise. Central banks often adjust their views as economic conditions evolve, and even differing opinions among policymakers don't necessarily tell us much about where rates are headed months from now. For long-term investors, the bigger question isn't whether the Fed moves rates by 25 basis points. It's whether businesses keep investing, consumers keep spending and companies keep growing earnings. Rate moves can sway sentiment in the short term, but we think investors often overestimate how much control policymakers really have. A rate hike could represent a minor headwind to the economy, but is not by itself enough to undo all of the positive trends that we see today. But monetary policy is ultimately just one of many forces shaping economic activity and stock returns. We believe investors are better served by focusing on broader business and economic fundamentals than trying to guess the outcome of every Fed meeting.

Next up, US retail sales.

Also on Wednesday, the U.S. Census Bureau releases August retail sales data. Recent reports have trended downwards, and that's revived the familiar chatter about consumer spending and the health of the economy. Whenever retail sales dip, some commenters rush straight into recession fears. But remember, monthly retail data are notoriously volatile, and short-term swings are perfectly normal, even in a growing economy. Notably, year over year retail sales figures were lower than today's figures for much of 2023 and 2024, and yet, no recession ensued. Another point worth remembering is that retail sales tells us what consumers did recently, not necessarily what they will do next. While spending data can be a useful snapshot of current conditions, it isn't a reliable predictor of the economy's future direction. It's also important to remember that retail sales capture only a portion of what households actually spend. Many of our biggest costs, including housing, healthcare and utilities, barely show up in the report. And consumer spending also isn't quite the economic swing factor many assume it is. Although consumption represents a large share of economic activity, most household spending goes towards everyday necessities that tend to remain relatively steady even when people are feeling cautious. It is business investment which tends to swing dramatically over time, contributing to economic booms and busts. That's why we caution investors that a softer retail sales reading doesn't automatically signal weakening economic fundamentals. We think it's far more useful to focus on broader trends that develop over time, more than the inevitable month-to-month noise that will always be a part of the retail sector.

Finally, Medicare annual enrollment.

Medicare coverage can change from year to year, and so can your needs. With Medicare's annual enrollment period set to open in just over a month, this window is your chance to review your current coverage and confirm whether it still fits your health needs and your budget for the year ahead. First, let's review the different parts of Medicare, since each plays a different role. Part A covers hospital insurance, while part B covers medical services like doctor's visits and outpatient care. Together, those two make up Original Medicare and are administered through the government. Part D helps with prescription drug costs. Part C, also known as Medicare Advantage, bundles many of these benefits into one plan offered through private insurers. Lastly, Medigap is supplemental coverage you can add to help with out-of-pocket costs. Here's the date to circle on your calendar: the annual enrollment period runs from October 15th through December 7th. During that window, you may be able to switch from one Medicare Advantage plan to another, move from original Medicare to a Medicare Advantage plan or back again. You may also join, change or drop a Medicare prescription drug plan. Any changes generally take effect on January 1st. Even if you're happy with your current coverage, it's a good idea to review it each fall. Plans can change their premiums, deductibles, copays, covered prescriptions, benefits or provider networks for the coming year. A plan that fit you perfectly this year might not next. A few minutes now can save you a surprise bill later. As you review your options, consider a few important questions. Are your doctors, specialists and preferred hospitals still in the network? Are your prescriptions still covered and have the costs or pharmacy options changed? Have your premiums, deductibles, or out-of-pocket costs changed, and do the plan benefits line up with your health needs and your financial goals? Before making a change, take a little time to compare your options and how each one affects both your coverage and your budget. We encourage you to speak with a qualified Medicare professional or your financial professional about your individual situation.

And that's it for this episode of Three Things You Need to Know This Week.

For more of our market views, check out This Week in Review, released every Friday, or visit FisherInvestments.com. Thanks for watching and don't forget to Like and Subscribe.