Jeff’s Weekly Stock Market Commentary: Is The Federal Reserve Confused?
Federal Reserve Chairwoman Janet Yellen testified before Congress yesterday—I’m sure we were all glued to our TV’s hanging on her every word…NOT! Did we really expect her to say anything new and/or to change course? I didn’t. Last week she confirmed that the economy is continuing to slow down and that poses ‘risks’ to her forecast for growth. Thus rate hikes for this month are off the table.
A brief recap for my clients (they have a life and are out enjoying it instead of parked in front of CNBC) is that our esteemed Fed Chairwoman seems to be confused. Changes in the direction of interest rates traditionally occur slowly over time so that the markets can build those projections into their investing logic.
The more visibility in the economy and the interest rate environment the easier it is for investors and money managers to structure their portfolio for the long-term.
Jeff’s Weekly Market Commentary: Waiting Out The Storm
I’m Jeff and this is my Weekly Market Commentary for May 18, 2016.
I am 51 years old and for most of my life I haven’t really had any hobbies. Over the last year, though, I have discovered that I really enjoy sailing. The power of the wind is incredible and the thought that sails can be used to harness that wind and transfer the energy into forward propulsion seems almost magical.
One big difference riding in a sailboat versus a motorboat is that sailboats lean over as the sails catch the wind. This is known as ‘keeling’. Initially, it feels quite dangerous as the boat starts to roll to the side 45 degrees!
It is very unnerving for a lot of people—like my wife! She prefers keeping her feet firmly planted on terra firma. Keeling reduces the drag and helps the boat start to skate across the water. Of course the wind doesn’t always stay constant so the degree of keeling keeps changing.
Over the last several months I have said that I believe we have seen the market ‘highs’ (2133 on the S&P 500) and that we may see the recent lows (1810 on the S&P500) broken.
As we entered into 2016, the S&P500 had the worst first 6 weeks in the history of the S&P 500….EVER. It plunged 12%. Since then it has surged back up to 2064. If you listen to the Wall Street System pundits, you’d think that everything is fantastic!
Hmmm. I don’t agree. Let’s put this recent surge in the S&P 500 in context.
Jeff’s Weekly Stock Market Commentary: Global Slowdown
Just last December, Federal Reserve Chairwoman, Janet Yellen announced that they were raising interest rates by 25 basis points because the economy was doing well. She also telegraphed (through their ‘dot plot’) that there would be additional 25 basis point increases at each of their meetings over the next two years. The market didn’t like that and bond yields actually went down on the news (making those of us invested in UST’s some money); and the stock market dropped roughly 12% between the announcement and February 11th.
Last Wednesday, the Fed blinked. They decided that the economy wasn’t strong enough to sustain another 25 basis point increase right now. Moreover, they (in the updated ‘dot plot’) signaled that the trajectory of any increases in the future would be slower and longer.
The stock market rallied on the Fed news of no interest rateon Wednesday. The stock market has been rebounding the last month ‘off the lows’ set on February 11th. Even after surging for over 3 weeks though, it is only back to where it was at the beginning of the year.