Thread: Markets, Fed Policy and Managing Expectations

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  1. #1
    Airbladettk
    Guest

    Default Markets, Fed Policy and Managing Expectations

    Although many of the functions the Fed conducts are business as usual, the big difference today from years gone by is how the Fed fails to speak with one voice. Now, investors have to play the proverbial guessing game, which results in market volatility.
  2. #2
    Airbladeyea
    Guest

    Default

    One would think the Fed officials would like to get out of the spotlight and just read the data, meet every two months, decide to raise or not raise rates, explain why and return to their cozy offices.

    Thats how the Fed used to operate. There was no mid-Federal Open Market Committee (FOMC) meeting state of affairs, or a litany of February governor speeches at every high-dollar chicken and pea luncheon spanning the country.
  3. #3
  4. #4

    Default

    The catch-22 is that the Fed floated the idea of an exit strategy. The Dow then gave up a 200-point rally and traded into negative territory inside of one hour. It harks back to similar commentary that former Fed Chairman Ben Bernanke laid out in mid-2013 when he talked about exiting the stimulus program. Bond yields jumped much higher than expected and spurred numerous Fed governors to try to talk back the market, especially bond yields. It seems the Fed has a real issue of not letting the markets trade freely in accordance with real-time sentiment.'$@ ' ""
  5. #5

    Default

    The fact that the market would react so dynamically without the Fed actually doing anything, and only talking about slowly paring down its $4.5 trillion balance sheet in what would be a long and drawn-out process, means the Federal Reserve has created a trigger-happy landscape in several asset classes. This is the very thing they were lecturing everyone about, saying Fed policy going forward would be different this time, after the 2007-08 financial crisis pushed Fed rates too low for a prolonged period to stimulate the housing industry. Although there are definite signs of an improving economy, it’s my view the stock market is still tethered to a dovish Fed.

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