Episode 183: Fed Speak and Are You Building Wealth Or Just Staying Busy?

The Fed may not cut rates tomorrow, but your portfolio can still feel every word Jerome Powell says. We walk through what’s happening in markets right now including earnings chatter, oil price volatility, and why geopolitics has been dominating investor attention. Then we narrow the focus to the FOMC setup: what a “no change” decision could mean, why forward guidance matters, and the specific parts of the Fed statement that hint at whether rate cuts stay on the table.

I also lay out the two paths markets are bracing for. A steady, consistent message could bring a modest relief rally. A more hawkish tone tied to inflation pressures and energy prices could spark a sharper drop and shift leadership away from cyclical sectors, with defensive areas like utilities, staples, and health care holding up better. If you’ve ever felt lost translating Fed speak into real-world decisions, this gives you a clean checklist for what to watch.

Then we switch gears into a practical “top 10” set of investing and personal finance rules you can actually use: the 1% housing maintenance rule, the 28% mortgage rule, a simple way to estimate passive income using a 4% yield, the Rule of 72 for compounding, the 4% retirement rule, the 50/30/20 budget, building a three-to-six-month emergency fund, and the habit that ties it all together: pay yourself first. Subscribe, share the episode with someone who worries about rates, and leave a review so more people can find smarter, calmer money advice.

Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC.

The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may suit you, consult the appropriate qualified professional before deciding.  

Transcript

Welcome And Quick Disclosures

SPEAKER_02 0:01

Welcome to Money Matters with Greg, where we dive into the money conversations shaping your life. From investments to estate planning, insurance to taxes, we cover it all with a fresh perspective. Join Greg and his guests each week to get inspired and take control of your financial future. Let's get started. Securities and investment advisory services offered through LPL Financial Registered Investment Advisor, member PenRedis IPC.

Markets And Oil Before FOMC

What To Watch In The Statement

Hawkish Outcomes And Market Fallout

Ten Simple Rules For Wealth

SPEAKER_01 0:56

So excited to have you here. Welcome to Money Matters with Greg on 103.1 FM W V L P. We broadcast on Thursdays at 1 o'clock and then replay it on Saturdays at 1 o'clock as well. And then also anywhere you pod, you can find us Spotify, YouTube, you name it, wherever you are as far as wherever you pod, really. You find us on socials at Faro Wealth, F-A-R-R-A-L-L Wealth, and uh any of the socials, Instagram, LinkedIn, Facebook. We always mention this. This show is about money. We have conversations about money in regards to making money, investing money, saving money. We're going to go over two things today. One, we need to talk about the Fed and what's going to happen tomorrow. And hopefully we'll see. At least we can try to estimate as much as we can. I think it's really, really important that everyone knows what's going on with the Federal Reserve. Obviously, Chairman Powell's last meeting that looks like for certain. And we'll see uh how that all goes as far as the press conference goes with that. I want to talk about that. And I also want to talk about really 10 rules that I can help you with as far as investing, some of the rules that are out there that you want to follow in regards to investing, putting money away and uh creating your wealth, growing your wealth, protecting your wealth, preserving your wealth, and then ultimately having your wealth distributed in your lifetime distributed after death. So these are just those four quadrants we always talk about in the show in regards to the wealth management issues we see in our high net worth clients and high net worth families and the business owners we work with. Just because they have a bunch of number numbers behind their net worth that you might not necessarily have, they have some of the same issues. So we try to always bring those issues to everyone so everybody can benefit and uh really be a fly on the wall on this show. Very always excited to acknowledge the fact that we're part of the WVLP family. Very excited always as well to be able to broadcast on Thursdays and Saturdays at 103.1 FM. So station identification for that. Also, highly recommend any of the conversations that we have here today. Uh recommend you consult with your financial advisors, your tax attorneys, and your uh accountants as well, any attorneys, your team. We always talk about assembling a team and having a uh wealth management team that is your team and works for you. We are fiduciaries uh here uh at LPL, and we push that very much that that is our mission is clients first. And you want to have a team that is client first and forward thinking for you and for your family's uh well-being to make sure that everything's invested on your premise and that everyone's working for you or you with your interest in hand. Um I want to get to the Federal Reserve here and what we're kind of seeing. I mean, we you know we tapped uh as far as the market goes, we tapped uh all-time highs again, uh kind of come off here. We've had big earnings week. So big week this week, a lot of earnings, a lot of uh uh uh different uh, you know, the the the large cap companies that you're following, the tech companies you're following is a big tech week. Um, this is a big earnings for quarter or quarter one. So you're seeing a lot of volatility in there. You're also seeing volatility back to the conversations about oil. So goes oil, so goes the market right now, and oil right now has uh retraced to go back up. It has definitely rallied uh in the last few days. Uh that is the focus of what we've been watching as far as what happened last Friday. These steady advances off of these Friday lows that uh actually happened here, really putting pressure on treasury yields and a number of things that are just, you know, we're watching. There was a really bad report with OpenAI as far as their revenues that that hit the market. But for the most part, we're kind of muddling, trying to figure out the news that's going on right now with uh rallies last week, uh, and then ultimately uh we've been down today. It's a lot of news to figure out. I mean, that's really what what what uh when I say muddle, I I really mean it. We rallied here, now what is kind of the conversation. And now what leads into the FOMC preview. Uh look, it's not often that the Fed takes a back burner for investors, but it's really been the case here in the last few weeks because oil volatility, geopolitics, geopolitical issues certainly have dominated the narrative. Now, this may change with tomorrow. So Wednesday's FOMC meeting isn't really dramatic from a rate of decision. Virtually no one expects a rate cut, but it is important because, and I want to shed some light on this into whether the Fed still thinks it's it'll cut rates at all in 2026, as they alluded to in the last few meetings. And this may matter to markets more than you think as we move on. Now, it's true that Fed fund futures are only pricing at a 30% chance at a rate cut by the year end. But the forecast really largely is tied to the price of oil, oil drops, uh, U.S. Iran ceasefire, then we're going to see inflation anxiety sort of recede. Expectations for rate cuts shoot higher, easily over 50%. And the point here is that even though the Fed fund futures don't have a rate cut in 2020-26 priced in, the reality is the markets still expect uh the next move by the Fed to be a cut. That was really reinforced by the Fed dots that were back in March. And this really showed that Fed expects to cut rates by year end. The bottom line on that is really the vast majority of investors do expect uh a Fed rate cut that will sort of meet this, will sort of make this meeting positive or negative for stocks. And that's really why we're watching, is like trying to figure out where this is going to affect the market. So Chairman Powell tomorrow will reinforce that sort of the expectation for an eventual rate cut, or you could push back on it and cite sort of rising inflation pressures and look at the meeting as really no dots overall. And really looking at the statement is really, really key here. So looking at the statement, two areas of focus from the last meeting are the balance of risk in paragraph two and the forward guidance in paragraph three. Now, currently both of those imply future cuts. On the balance of risk, the Fed refers to itself in a statement as this quote unquote attentive to both sides of risk, which whatever. But thanks for that. Meaning it is as focused on supporting really growth as it is eliminating inflation. Okay. On forward guidance, the Fed statement refers to extent and timing of future cuts in air quotes. And if you're watching this on YouTube, you're obviously getting air quotes. But if you're listening to those podcasts, I'll just do the error quotes here. And this tells us that thinking of the Fed is sort of when they cut rates next to how much, not if the Fed cuts rates. So it's gonna come down to a follow-up on those two paragraphs, right? So paragraph two and guidance on paragraph three. This is Powell's last press conference. So he'll be asked about the last two meetings, whether the rate hike was considered, and his responses are going to be important because does he go out guns blazing and rattle the markets? And back in January, he stated that no Fed officials had a rate hike as a base case because there's been whispers of a rate hike versus a rate cut. Now in March, he mentioned that the again, quote unquote air quotes, vast majority of Fed officials didn't have rate hikes as a base case. Vast majority means somebody's early for rate hikes. Who might that be? Again, that's a dot plot type conversation. But point being, there are a few more Fed officials that appear to be thinking about rate hikes. And if that continues, markets will notice for sure, and it's not going to be in a good way. So what's expected? Here you go. No change to rates, no material changes to the statement. Powell repeats, quote unquote, vast majority of Fed officials aren't considered rate heights, and we take our ball on our bat and go home. Uh no moss, thank you very much. Markets expect the Fed to keep it consistent in 2026. Um definitely markets consider a wait and see approach to spiking oil prices and the war. And as such, they really won't um make a substantial change in the statement and then do not um and not do anything to really imply rate cuts are off the table. Um we'll see. So likely market reaction with that statement is a slight relief rally. Uh, there is some concern that the Fed could get a bit more hawkish in the tone in response to the high oil prices and inflated inflation metrics. Um, so you know, status quo decision should cause a slight relief rally, but nothing substantial overall. Now, what happens if it's hawkish? Hawkish if the statement is altered to either tilt the balance of risk towards inflation and or change forward guidance to imply the Fed is officially on hold. And Powell states most or many of the Fed officials aren't considering rate hikes, meaning the number is shrinking. So these changes could see the Fed really officially guide to no rates in 2026, which would be a surprise. They really could do that by stating inflation has bigger risks, altering forward guidance, say future changes, you know, uh really to the Fed's funds rate won't be happening, or uh really by a Powell implying that the idea of rate hikes is gaining traction in the Fed in response to higher oil and inflation. Likely reaction to that in a market reaction, a solid drop. Any of these changes could imply that the Fed is on top or on hold for the foreseeable future of rate hikes and uh definitely something to worry about. So that would remove a bullish tailwind to the market that we've had here recently. Um April's been really good, knocking on wood. We'll see what happens. So see if Powell can mess it up. Honestly, I'm so I'm really anticipating him to make us nervous. And um I I'm hoping he does the classy thing and just walks out the door and rides into the sunset because it'd be nice to to have some sort of just sort of validity here and security, the fact that we're not in Fed speak minds, which is super frustrating because is the market the market's following the Fed and what the Fed says, it's usually really volatile. So if they do say, you know, this hawkish tone because of inflation, we'd expect cyclic cyclical sectors to lead to the markets lower, while defensive sectors shouldn't rele you know, depends utility staples, healthcare typically outperform. And we we just expect everything to be lower depending on what he says. So if more feds favor a rate cut, the best chance for that surprise is really through his press conference. You're not gonna get it from anywhere else. So it'd be a modest rally um as well. I don't really see that happening because it seems like they're leaning towards Nomos or rate hikes. And right now, let's figure this stuff out. And we need time to be able to figure out the war and oil and a number of things, and the market's trying to do that as much as it can. We'll see super important stuff right there in regards to the markets and the Fed, and then just the overall thought process with what we're seeing, and uh, we'll see how the market reacts. Sure. So um I hope that was helpful in sort of updating you on what's going on with the Fed and what's happening this week. Uh, we are uh broadcasting here on Money Matters with Greg, uh the show's Money Matters with Greg. I'm Greg Farrell, CEO and owner of Ferrell Wealth. It's a wealth management firm. We are financial advisors and fiduciaries here, uh, helping clients of high net worth individuals and families with their overall investments, their debt, the structures, their stock options, their estate plans, a number of different things that we talk about, and we try to bring those conversations to you uh to help you out in regards to your wealth, growing, creating, protecting, preserving your wealth over time. So hopefully this was helpful to kind of like figure out what's going on with the Fed. I also wanted to be able to get into really a sort of a Dave Ledman or David Letterman, and many of you won't even remember who he is in this audience, but um a very popular late night host of the David Letterman show in New York. Uh he is a ball state graduate and proud ball state graduate uh that has donated millions of dollars to the uh David Letterman uh communications uh department uh there. So very thankful for him for that. He had a top 10 that would always uh drop. So 10 reasons why, 10 reasons to do, 10 reasons to think about. I'm basically gonna mimic that a little bit and just talk about some of the things that um that can be uh help you with your wealth and kind of rattle off some things and get into these things a little bit later in more detail. If you have any questions about these, Greg at Farowealth.com, please email me. I'd love to hear from you. If you have any ideas about future topics you'd like to be able to talk about on the show uh or have our guests on the show, of course, we'd love to have you as well. So, one thing just off the top of my head here, as far as the 10 reor, like I've got an organized list here, but this was off the top of my head initially, and then sort of has been formulated into these rules that uh are part of your life. And if you have a question on it, obviously you can AI it, Google it, whatever. But one of them is the first of his 1% housing rule. So budgeting 1% of your house value every year for maintenance, repairs, and surprises. Now, obviously, if you're renting, you could do the same thing in regards to uh this for saving for a home. But basically, on a$500,000 home, if you have$5,000 set aside annually, it's about$417 a month. This really keeps you from getting crushed on that new roof, the HVAC failure, the plumbing nightmare that most homeowners dramatically underestimate. You look, I live in the Midwest, we live in the Midwest, we've been having horrible storms. We've had water, we've had rain, we've had hail. It's been brutal. Our march sucked. Uh, it's one of the worst marches I've ever been around as far as just what's going on here in the spring. But whatever, it's it's part of the gig. But you do have, and when you come out of winter, you have issues, and that there's definitely stuff that you're like, I didn't see that coming. So setting aside 1% of your home's value every year for maintenance is something to seriously consider and to work on. Uh the 28% mortgage rule is uh the next uh rule. No, so never let your housing expense or payment mortgage plus taxes plus insurance plus your HOA exceed 20% of your gross monthly income. You know those numbers. I don't, but you can certainly put pen to paper calculator, but banks will be really happy to approve you for more. Don't let them. Staying under this keeps your budget, but really it gives you breathing room and protects you if uh rates rise or income dips or something happens to you in your job, uh to you and your family, to you and your spouse, whatever it might be. 28% mortgage rule is a really good rule. Mortgage plus taxes, plus insurance, plus HOA, not over 28%. Rule of$1,000. To generate$1,000 of monthly passive income at a conservative rate of 4% yield, you need$300,000 invested. And I'll scale it up to$2,000 a month, you need$600,000 invested. If you want$400,$4,000 a month, that's$1.2 million invested. When people talk to me all the time and ask me, like, what's my number? What is needed in order for me to retire? With any good uh uh financial advisor and planner, the first thing, the first question they're gonna ask you is cash flow. Like, what are you spending? So if you're not spending one, you know, four more than four thousand dollars a month, then you're gonna need one point two million dollars to be able to generate that passive income and kick off that yield so you don't dip into the 1.2 million as far as principal. So this makes retirement income feel real, how and tangible and sort of this abstract number that's out there. Okay. So for every thousand dollars a month in passive income, you want to consider the four percent yield, which you can you can get out there right now. You don't have to get too risky to get the four percent yield. Treasuries are yielding four point two right now. So you need three hundred thousand dollars to get one thousand. You need two thousand, you need six hundred thousand for two thousand, and you need at$1.2 million for four thousand dollars a month. Okay, so that's the rule of one thousand. Next one coming in at uh, let's see, where were we number seven? Um one hundred minus your age rule. Now, this is gonna be one that I'm gonna disagree with. Um, I want to give it to you uh for facts uh straight up. So you subtract your age from 100 uh or 110 or 120 if you're more aggressive. So that's an easy way to do it, uh, to get your stock allocation percentage. So if you're age 30, um then uh it would be 70 to 90 percent stocks. You age 60, you're 40 to 60 percent stocks. So it's subtract your age minus 100. Now it's simple, it's an automatic way to reduce risk as you age without overthinking portfolio design and how to how do I do this and how do I do that? Where does this go? So very, very easy. I'm gonna disagree the fact that it's 60 that you need to get into 40% of equities and 60% um of income. But look, everybody's different. We don't talk people into uh a time horizon. We we don't talk people into their risk tolerance. We have conversations with people, and look, if I was in the business of judging, I'd be out of business. So it is very important to have equity exposure because just because you retire doesn't mean you die. You have expenses, you have inflation, you have things you have to compete against. So I'm not necessarily a fan of saying, look, I gotta tone things down so much that you absolutely shut things down. I think it can be warranted and justified to have a better or even a higher stock allocation as you grow and grow older. You still have time on your side, even though you might not necessarily think so. You're not gonna lose all your money tomorrow because you still have other assets or you still have an asset allocation that is somewhere between 50-60% um conservative, uh, wherever that might lie. But 100 minus your age rule is a pretty good rule to just if and if you want to be more aggressive, age yourself at 120 minus uh your age. Rule 72. Very, very popular. Divide 72 by your expected rate of return to estimate the years um that it's gonna take to double your money. So the rule of 72 is doubling your money. So think about that. 8% of return is gonna take nine years, 10% return is gonna set take 7.2 years, 12% return is gonna take six years. So if you have a hundred grand in order to get 200 grand, at 12% is gonna take six years to double it. So this rule makes the power of compounding visual and exciting, and you see it, and it turns saving into a race you can actually see winning. So put that money away, let the power of compounding do its job, um, and then double your money. And then the$200,000 becomes$400,000, the$400 becomes$800, the$800 becomes 1.6. So these are things that just keep on rolling. Like don't be discouraged that you only have five grand to put away. Um, it's okay. Five's gonna turn into 10, 10's gonna go to 20, 20 is gonna go to 30, or 20's gonna go to 40. So these things really, really matter as far as time in the market, not timing the market. Get it in there and make sure that you've got a good asset allocation that's quality that's gonna get you on a path to the rule of 72. Number five, the 10 times rule. Aim for 10 times your annual salary saved by age 60 to 67 for a comfortable retirement. Example of that is an$80,000 salary. You want an$800,000 portfolio or$800,000 investable assets that can kick off income for you down the line, wherever that might be. Now, this is clear and it's a motivating target that really begins this vague like save more advice. Okay. So 10 times your annual salary saved by ages 60 to 67. You're going to have Social Security, you're going to have other income mentions and coming in here. But basically knowing that the 10 times rule is really, really important, if you want you, that's what you're going to need. Now, back to this. What's your cash flow? If you're spending more than the$880,000 salary that's going to kick off on an$800,000 portfolio, like you're going to put too much pressure on the portfolio based on your cash flow. So if you know you're going to be spending more in retirement and you know you want a lavish, more involved travel expenses, you know, uh fishing, golfing, membership, all these other things in retirement, you know that your cash flow is going to be higher than others. So you might need to save more money. And that's just your own personal preference. The 4% rule, number four, in retirement, uh, we know this, we hear this all the time. You can safely withdraw 4% of your portfolio in year one and then adjust for inflation year after year. But historically, it's lasted like over the last 30 plus years in almost every market scenario that's out there. It's really the gold standard for turning big number into substantial income without running out of money too soon. I always like to relate it to a college endowment or uh a nonprofit endowment, that they know they cannot spend the money above and beyond their principal. In order to stay in business, they need the principal to for creditors, for loans, for growth, or whatever it might be, and they don't want to spend more than the actual core. So they are able to kick off 4%. They take 4%, use it for expenses, and then they never lose the principal. So if they want to stay in business, the same rule goes for you. So if you have a million dollars and you don't spend more than the 4%, then you know you're gonna have$40,000 coming in every single year in income. You can guarantee that, and you're not gonna lose the the one million dollars. Okay last three coming up here, the 50-30-20 rule. Now, this is the simplest budget on earth, okay? So, but let's just make it simple.

SPEAKER_00 24:27

50% needs, right? What do you need? I need housing, food, transport, minimum debt. Okay? Those are my needs. Let's see if we can get rid of the minimum debt. Housing, food, transport, right? 30% are wants. What do I want? I want to go out, I want to eat good food, I want to be entertained, I want to have hobbies, I want to have a life.

SPEAKER_01 24:54

20% savings, debt payoff, retirement, emergency fund, extra payments to yourself, paying yourself, which we'll get to in a minute. It works for almost everyone and gives you uh the guardrails without really tracking every coffee and all this other stuff like you see on TikTok and everywhere else, as far as Instagram or wherever you go on socials. Like if I don't drink that coffee, well, you know what? Maybe I want to budget that coffee. That's that's important to me. All right. So um figure out some other way where you might be able to knock something else out to be able to afford that coffee and not think about it. This is a great, easy way to do it. 50% needs, 30% wants, 20% savings, 50, 30, 20 rule. Okay. Next, two, next uh the three-month uh emergency rule. So three to six month emergency rule. This is uh paramount. Keep three to six months of essential living expenses in cash, in a very safe, liquid account, high yield savings account, whatever you want to do, wherever you want to go. Now, this uh recommend, I've been self-employed since I was 23. I'd probably recommend more if you're self-employed because you have variable incomes all the time. You support a family, and you're, you know, you don't have that set W-2 cash coming in every single time. So sometimes you're gonna need to dip and uh grab into the savings account because things in your income moved. This is your life doesn't go as planned insurance policy, sleep at money at night account. Prevents you from sort of derailing your entire financial plan with one bad event. Furnace goes out, there's a flood in your apartment, and you suddenly have a, you know, ten thousand dollar replacement fee, whatever you need to replace all your furniture, and you know, it's tragic, right? But it costs money. Uh you have to move, uh, you get a new job, all these other things where this is where like I need to kind of dip in. I lose my job. You need three to six months of emergency rule. That's kind of a nice rule to have. Okay. And then finally, on our David Letterman top 10 is number one, pay yourself first. If I could have followed this rule back when I was 23, I can't even imagine the amount of money I would have. So save and invest first. And this is basically before bills, before fun, before everything else. You make sure you're putting money away into your name, into the buckets of money that you designed and you've developed to make sure you pay yourself first. Pay yourself first, and then everybody gets theirs. Now, you really need to treat your future self as the most important creditor you have.

SPEAKER_00 27:38

Automate transfers the day you get paid.

Wrap Up And Listener Callouts

SPEAKER_01 27:43

This is a single mindset shift that really separates people who build wealth from people who just stay busy and have a job that runs their life. Everything else on this list becomes 10 times easier once this is non-negotiable. Pay yourself first. Now these rules work really best together. Pay yourself first, powers the savings rate, it feeds the 50-30-20 rule and the 10 times target. The rule of 72 shows you why starting early is really magic. The emergency fund and housing rules uh protect the whole system and probably will save your relationship, your marriage, and a number of other things. Emergency fund is great because there's like less stress, which is the number one issue in married couples and any couples, really, is financial situations, for sure. That's my top 10. Thank you, David Ledman, for your honoring you today, uh, really, and your top 10 list that you've done for years. Uh, the show's Money Matters are Greg. I'm Greg Farrell, CEO and owner of Faro Wealth. It's a wealth management firm here in Valparaiso, Indiana, serving clients all over the nation. Uh, I think we're literally in half the United States now, which is wonderful. Uh, thank you to our clients and our friends uh that are a part of our group. Um, and thank you for our listeners for being here. WVLP 103.1 FM here locally, uh at 103.1 FM. You can find them at WBLP.org. I highly recommend you checking them out and all the different uh uh shows that are out there that are fantastic. Uh you can also listen to us uh Tune In Radio uh and then find us on YouTube uh and anywhere you pod, Spotify, Apple, you name it. Um thanks for being here today. Uh looking forward to another great week. Uh hopefully our April improves in regards to the weather here in the Midwest. I want to congratulate um our Chicago Bears on a great draft. Um, looking forward to the future here. And I also want to congratulate uh my favorite uh Indiana University National Champions who had eight going in the draft. Uh, very excited to watch those guys uh in the future as well. Nice little sports plug at the end. In the meantime, guys, have a great week and uh looking forward to uh you guys reaching out and uh letting me know how things are going. Okay. Talk soon. Thanks again. See you bye.

SPEAKER_02 30:10

Thanks for tuning in to Money Matters with Greg. We hope you gained some valuable insights today. Remember, your financial journey is personal, but you don't have to go it alone. If you enjoyed the show, be sure to subscribe and share. Until next time. Here's to making your money work for you. Securities and investment advisory services offered through LPL Financial, a registered investment advisor, member FINRA SIPC.