Still Smoking In Bed

Analyzing economic and market history can be most instructive and informative. After all, you don’t know where you’re going until you know where you’ve been. A notable past event in this regard was the 60 Minutes interview with then Fed Chair Ben Bernanke on March 15, 2009. The reason for the interview at the time was to both reassure the country and its financial markets as well as explain the Fed’s extraordinary monetary policy actions going forward. But what is perhaps most notable seven years on from this landmark interview is not the policy actions that followed, but instead what has still yet to take place after so many years. In some respects, it is yet one more example to help explain the growing frustration and unrest around the world.

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How To Fight The Fed

It is an understandable concern for many investors wary from years of relentless monetary policy intervention into capital markets by the U.S. Federal Reserve. Many look around and see a global economic backdrop that is shaky at best, corporate earnings that are in steady decline and valuations that remain rich by historical standards. But they also have been conditioned over the past several years to expect whenever the market enters into any sustained period of volatility that the Fed will come rushing back in with more stimulus. This leads to the following conflict for some investors, which is that they may be inclined to lighten up on their stock allocation but are reluctant to do so amid the worry that the Fed will begin talking up a new stimulus program that will propel stocks to new heights. Two key points may be helpful in working to overcome this dilemma.

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Latest Gaze Into The Fed’s Crystal Ball

The Fed entered the New Year with a bold plan. Over the course of the next twelve months, the U.S. central bank was strongly suggesting its intent to carry out four quarter point interest rate hikes. But since the start of the year, the global economy has continued to sputter, the stock market has dropped like a stone and previously latent risk factors have suddenly surfaced to grab the attention of investors. Although the Fed continues to try and talk a good game about their determination to raise interest rates, what is the latest market read on what the Fed will actually do?

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What Have You NOT Done For Me Lately

It used to be a time not very long ago when the U.S. Federal Reserve was lavishly pampering investment markets. And if they weren’t flooding the financial system with massive liquidity injections from their daily Treasury purchases, they were out talking seeming all the time about how much more they were willing to do for the markets the moment trading turned lower into the red. But it seems that a critically important change for investment markets may have finally come to pass. The Fed is no longer providing stimulus to financial markets. Instead, they have finally raised interest rates for the first time since the financial crisis. Some contend the Fed will eventually return to their pampering ways, as the market turns more sour, while others contend that market neglect may finally be on the minds of Fed policy makers. Who’s right? And what are the implications for financial markets?

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After The Rise: Fed Policy Predictions For 2016

It’s finally done. Finally. For the first time since the depths of the financial crisis, the U.S. Federal Reserve has lifted interest rates off of the zero bound. And in the hours since the Fed announcement on Wednesday afternoon, the media has been filled with pundits sharing their predictions on the future path of interest rates now that the ice has finally been broken. But when it comes to interest rates, I for one like to look past the qualitative predictions and focus on the quantitative data. In short, what is the market now pricing in for its expectations for future interest rate hikes in the coming year? After taking a closer look, I have a decidedly different view.

Please click on the link to read more of my article on Seeking Alpha.


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