How to invest if you believe the Fed can't stop the economy from falling apart

By Philip van Doorn

Also: What to expect for loan interest rates, how Social Security survivor and spousal benefits work, and advice from the Moneyist

On Wednesday the Federal Reserve's Federal Open Market Committee cut its target range for the federal-funds rate by 50 basis points to 4.75% to 5.00%, which wasn't much of a surprise to investors.

The bond market had long anticipated the interest-rate cut and the yield curve remained inverted, with short-term rates higher than long-term rates. Late on Friday, the yield on 10-year U.S. Treasury notes BX:TMUBMUSD10Y was 3.73%, while the yield on 3-month Treasury bills BX:TMUBMUSD03M was 4.68%.

An inverted yield curve has traditionally been considered a sign that a recession is coming. Investors in the bond market wish to lock in the highest yields possible, as they anticipate a period of very low interest rates if the U.S. economy begins to contract. Rising demand means rising prices, and when bond prices rise, their market yields fall.

Do you believe the Federal Reserve's timing has been right to engineer a soft landing for the U.S. economy and avoid a recession? When asked this question during an interview with MarketWatch's Jonathan Burton, David Rosenberg, a former Merrill Lynch economist who now runs his own research firm, said: "No. I don't believe in fairy tales." Rosenburg had this advice on how to invest ahead of the recession he expects.

Additionally, Joy Wiltermuth reported on the bond market's volatility following the Fed's rate cut.

And Joseph Adinolfi explained how an alternate indexing approach has been beating the S&P 500.

How low might mortgage rates go?

Any broad movement of interest rates will change home buying, selling and refinancing patterns. Some homeowners have been reluctant to sell, because they don't want to replace their low-rate mortgage loans with new ones at current rates. Others have waited to buy, for similar reasons.

But mortgage rates have already fallen to their lowest levels in two years, spurring refinancing activity. Here's how much further residential mortgage rates might decline.

Aarthi Swaminathan explained the math: Here's how to decide if you should refinance.

And Quentin Fottrell helped a reader with a related question: "I had three offers over 11 months": With the Fed's 50-basis-point cut, will I finally sell my house?

What about car loans?

Our Venessa Wong shared some math: Here's how much car loan payments might decline.

Here's more about how the Fed's rate cuts can affect different types of loans:

Here's when falling interest rates will hit your mortgage, car loan, credit-card bills and savings accountsThe size of the Fed's interest-rate cut doesn't matter as much for your wallet as this other key decision

Venessa also explored how electric vehicles have turned into the best deal for used-car buyers.

Social Security benefits for survivors and spouses

Alessandra Malito writes the Help Me Retire column. This week, she dug further into the differences between Social Security spousal and survivor benefits, and how to decide when to claim benefits.

A big contract could mean stability and an industry-leading edge

Through Tuesday, shares of Intuitive Machines Inc. (LUNR) had risen 111% in 2024. But late that day, the company announced that NASA had awarded it a contract worth as much as $4.82 billion, to provide communication and navigation services for near-space missions that could extend beyond the moon's orbit. That helped send the stock up 38% on Wednesday, which in turn was followed by a 24% gain on Thursday. Year to date, Intuitive Machines was up 263% through Thursday.

Read: With huge NASA contract, Intuitive Machines closer to becoming 'pre-eminent lunar infrastructure player', says analyst

Also: A huge NASA contract has sent Intuitive Machines' stock skyrocketing. This analyst sees even more upside.

If you are among the lucky, read this about pension planning

If you or your spouse will receive retirement pension payments from an employer, the two of you might have a very important decision to make. Beth Pinsker writes the Fix My Portfolio column, and this week helped a couple decide whether or not to accept lower pension payments in return for survivor benefits.

More from Beth Pinsker: 'Retirement is not a math problem,' says one of retirement's top math experts

Changes ahead for Intel

Shares of Intel Corp. (INTC) were up 12% on the week late in Friday's trading. But the stock was still down 56% for 2024 excluding dividends, which the company is suspending.

This week, Intel announced that it would turn its semiconductor foundry business into an independent subsidiary, and that it was expanding its relationship with Amazon Web Services, the cloud-services unit of Amazon.com Inc. (AMZN)

Reaction and related coverage:

Why Intel's latest move for its foundry business is so significantDon't let Intel's stock pop fool you: 'Things are likely to remain a struggle,' analyst saysMobileye's stock surges as Intel gives this reassuring signIntel's stock ranks dead last in the chip sector by this measure

Help from the Moneyist

Quentin Fottrell - the Moneyist - helps readers with complex financial-planning questions. At times, he is called in for advice on how to resolve difficult financial conflicts among family members. Here is a sampling of this week's articles:

I'm 54 and have terminal cancer. I have a wife, 47, and an 8-year-old child. How do I split my $1.5 million estate between them?'He was in the early stages of dementia': My father put my brother on the deed to his house. His lawyer had a big conflict of interest. What do we do?'He forced me to take Social Security at 62': My husband inherited millions, but never gave me a penny. If I divorce him, would I get any of it?

Investors: Don't miss out

Do you invest in index funds? Do you believe your portfolio is diversified? For one thing, the SPDR S&P 500 ETF Trust SPY, the oldest and largest exchange-traded fund tracking the S&P 500 SPX, is 19.4% concentrated in shares of Microsoft Corp. (MSFT), Apple Inc. (AAPL) and Nvidia Corp. (NVDA).

But you should also think about your index fund's geographic concentration. SPY has greatly outperformed the Vanguard FTSE Developed Markets ETF VEA over the past decade, for example. But this is a trend that cannot continue forever, as Mark Hulbert explains.

More from Hulbert: Dow's record run leaves transports behind. Here's what it means for stocks.

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-Philip van Doorn

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09-21-24 0627ET

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