The Federal Reserve risked accelerating inflation with its large half-point interest rate cut last month, according to one analyst at Wednesday’s Seeking Alpha’s Election 2024 Investing Forum, who saw the Fed's move as appearing politically motivated.

The Federal Open Market Committee last month slashed the fed funds rate by 50 basis points to 4.75%-5%, with moderating job growth in view alongside consumer price inflation overall moving lower. But both the August CPI and September CPI reports suggested disinflation was stalling, with core prices in each month rising to 0.3%, outpacing 0.2% expectations.

Chaim Siegel, founder of Seeking Alpha analyst Elazar Advisors, sees inflationary risks “after two high CPI readings,” and in a potentially stronger-than-expected October jobs report due Friday after ADP posted an October jump in private job growth on Wednesday.

“They might hold off on a rate cut next week, which, I think, would disappoint markets because everybody's expecting a series of cuts,” Siegel said. “Inflation is like a wildfire – until you put it out, it keeps spreading, and I don't think inflation is done. I think the Fed made a wrong move, and they let inflation percolate,” he said.

“Add on top of that a Trump win, they're going to be worried,” Siegel said, referring to the Fed. The FOMC will meet on November 6-7, just after Election Day on November 5.

Siegel pointed out a Wall Street Journal report this week that said economists were among those concerned that plans by former President Donald Trump, including tariffs on imported goods and leaning on the Fed to lower interest rates, risk stoking inflation.

“Even though nobody will say it's political, with Kamala Harris leading in the polls, they gave her a gift,” Siegel said about September’s larger-than-standard size rate cut. “Now with Trump leading in the polls,” talk has shifted to a potential pause in the rate-cutting cycle, he said.

In the fed funds future market, traders have wiped out odds of a 50bp rate cut in November, according to the CME FedWatch Tool, with recent better-than-expected economic data a factor in the move. Traders see a ~95% probability of a 25bp cut next month.

For investors looking to track the elections through market instruments, here are some politically driven Republican and Democratic exchange-traded funds:

God Bless America ETF (YALL)

American Conservative Values ETF (ACVF)

Point Bridge America First ETF (MAGA)

Democratic Large Cap Core ETF (DEMZ)

Unusual Whales Subversive Democratic ETF (NANC)

Unusual Whales Subversive Republican ETF (KRUZ)

Readers interested in investing topics tied to the upcoming election can read coverage from Seeking Alpha's Investing Forum: Election 2024 event; please visit this page.

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