With Kevin Warsh's first Fed meeting in the books, the Federal Reserve may raise interest rates in the near future to bring inflation down from more than 4% to its 2% target. While some investors feared Warsh would cut rates quickly to appease the president, he has instead signaled a commitment to fighting inflation, suggesting rate hikes could resume. Any increases are likely to be less aggressive than the 2022 cycle, when the S&P 500 fell over 19%, because the Fed funds rate is already at 3.50% to 3.75% compared with near zero back then. The S&P 500 may still be overdue for a slowdown after gaining around 93% since 2023, far outpacing its long-run average of 10% per year, and its heavy reliance on tech stocks adds risk. Long-term investors may want to stay the course, but those nearing retirement could consider safer investments like dividend-stock funds.
NVIDIA CorporationPotential rate hikes to tame inflation could slow economic growth and reduce demand for tech stocks like NVIDIA, which are sensitive to interest rates.