Home About Archives RSS Feed

@theMarket: Fed Gives Green Light to Stocks

By Bill Schmick
iBerkshires Columnist
It wasn't quite a QE III but it came close. This week, the Federal Reserve Bank extended the time period in which they would keep a lid on short-term interest rates to 2014 while at the same time pushing longer-term rates lower. Investors liked that and bought stocks on the news.

The Fed also said it would consider launching a bond-buying program and it wouldn't wait for a recession to do it. Fed Chairman Ben Bernanke hinted he would act if the economy and unemployment simply continues to recover at its present slow pace. At the same time, the Fed dropped its forecast for economic growth this year from a range of 2.5-2.9 percent to 2.2-2.7 percent. He targeted a 2 percent inflation rate for the country but also said he would be willing to see inflation a bit higher if it meant producing more jobs for Americans.

What all of this means for you and I is that the Fed is determined to do all it can to goose the economy, the stock market and the housing markets. In the past, when the Fed conveyed this kind of message to investors, the stock markets climbed higher. I expect the same thing to happen again this time.

It is not yet clear to me how telegraphing their determination to push longer-term rates lower over the next two-plus years is going to help home buyers decide on purchasing, as opposed to renting. If, for example, I was in the market for a fixed rate mortgage and I know rates might trend lower between now and 2014, I would be in no hurry to sign a contract.

The Fed's announcement is also bad news for those retirees who have fled the stock market and have their money invested in "safe" assets such as CDs and U.S. Treasury bonds. They will continue to receive next to nothing for their money while struggling to make ends meet as food, energy, medical services and other necessary living expenses continue to rise.

On the plus side, investors can be pretty sure that the economy won't get any worse and that the stock market is about the only place one can hope to achieve a reasonable rate of return on your investments. Of course, there will be the inevitable piper to pay down the road but central banks around the world have decided to worry about the inflationary consequences of trillions of dollars in stimulus when it happens. Future inflation fears is one reason that commodities led by gold and silver raced higher after the Fed meeting.

So do the Fed's actions change the bottom line of my investment strategy? Not really. I believe defensive areas of the stock markets (those stocks and sectors that pay dividends) will do just fine in this environment. High yield and investment grade bonds will also do quite well. We will still have pullbacks in the market this year and some of them might even be serious. Overall, I believe we are exactly where we should be.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or email him at wschmick@fairpoint.net. Visit www.afewdollarsmore.com for more of Bill's insights.

0 Comments
     

Support Local News

We show up at hurricanes, budget meetings, high school games, accidents, fires and community events. We show up at celebrations and tragedies and everything in between. We show up so our readers can learn about pivotal events that affect their communities and their lives.

How important is local news to you? You can support independent, unbiased journalism and help iBerkshires grow for as a little as the cost of a cup of coffee a week.

News Headlines
TurboProp Owner Pulls Donation Over 'Turmoil' at North Adams Airport
Eagle Street Initiative Work Begins With Delivery of Parked Pocket Park
Four Berkshire Women Celebrated as Unsung Heroines
Anthony's 16 Points Lead Team to Giorgi League Win
Williamstown Elementary School Committee Holds Final Meeting
Cheshire Considering Moving Town Hall to Vacant School
BIC Organization Ramps Programming Back Up, Preps For Groundbreaking
Mainers Secure Walk Off Win Over SteepleCats
Cecropia, Our Sylvan King
Letter: 180 Households Are Saving With Community Solar

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (261)
Independent Investor (357)
Archives:
June 2018 (5)
June 2017 (2)
May 2018 (8)
April 2018 (7)
March 2018 (6)
February 2018 (7)
January 2018 (7)
December 2017 (8)
November 2017 (5)
October 2017 (5)
September 2017 (5)
July 2017 (2)
Tags:
Jobs Wall Street Commodities Debt Ceiling Debt Energy Recession Oil Selloff Election Europe Federal Reserve Pullback Crisis Deficit Fiscal Cliff Euro Taxes Greece Retirement Interest Rates Markets Europe Currency Stock Market Stimulus Housing Metals Rally Banks Economy Bailout Japan Stocks Congress
Popular Entries:
The Independent Investor: Don't Fight the Fed
@theMarket: QE II Supports the Markets
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: Markets Are Going Higher
The Independent Investor: Does Cash Mean Currencies?
The Independent Investor: General Motors — Back to the Future
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
Recent Entries:
The Independent Investor: The Next Recession
@theMarket: Trump's $50 Billion in Chinese Tariffs Trashes Markets
The Independent Investor: How to Avoid Recession? Emigrate to Australia
The Independent Investor: Trump's trade war
@theMarket: Another Week of Market Volatility
The Independent Investor: Italy's Crisis Threatens Financial Markets
@theMarket: Nothing Memorable in the Markets this Week
The Independent Investor: It Is No Longer Enough to Simply Manage Money
The Independent Investor: Are Americans Saving Enough for Retirement?
@the Market: Stocks Look Ready to Reach New Highs