For those who faithfully ignore all things market
related, yesterday was just another day. But for the rest of us it was the day
the Federal Reserve Board and its Chairwoman Janet Yellen gave the capital
markets the news they’ve been waiting for, namely will they or won’t they raise
interest rates. Make more sense? I don’t think so, but I do think the faithfully
who ignore all things market related got it right. Without going through my
over generous arguments over the value of too much information the idea that
the Fed meeting yesterday should’ve garnered so much attention as to merit even
a comment from the president didn’t protect the outcome of an informed
investor, but an investor frustrated by the gargantuan speculators banking on a
negative comment going viral.
Whats my point? In over thirty years of being a Fed
watcher, necessary to many aspects of my business, I have never known such public
concern over a Fed decision as whipped up by the media. Look, I’m not
suggesting that caution should be absent, after all if you hold an umbrella
every day (and I do) sooner or later it’s going to rain. I’m merely curious why
when good things happen in the world it is reported with far less enthusiasm? The
few among the various Federal Reserve Banks around the country that recognized
the mixed signals that are coming off indicators that broadly measure economic
growth and inflation would’ve strongly recommend the Fed to hold off on any action. But those who
espoused direct action, given the nickname “hawks” get much more traction with
their message.
In the meantime, they were wrong and the Federal Reserve
Board did NOTHING yesterday.
That said, I’m focused on managing accounts to the
economy, not just the Fed. These days the preparation for any kind of Fed
action compelled me to slightly increase the allocation to fixed income,
primarily because of the aforementioned mixed economic signals. And while there
are many issues still brewing in the world, and I certainly don’t have to
repeat them, the markets are going to continue their corrective behavior. All
delivered with the civility of an interruption until there are indications that
economic activity is re-accelerating. That’s what I’ll be looking for and in my
opinion so should the Fed.
