FED

  • 11 Jul
    Watch Out: The FOMC’s Current Stance Could Impact Your Portfolio in the Long Term

    Watch Out: The FOMC’s Current Stance Could Impact Your Portfolio in the Long Term

    • Bonds are becoming riskier as yields are falling.
    • Inflation is at 1.2% and very likely to get higher as full employment is approached.
    • The FOMC predicts stability which could create a great environment for traders.

    Introduction

    On July 6 the Federal Open Market Committee (FOMC) June meeting minutes were released. As they give clear insight into how the controllers of our monetary policy think, it is very important to analyze the minutes in order to better position one’s portfolio and also execute short- and medium-term trades. The FOMC gave a clear indication of their expectations in relation to future GDP growth, unemployment, inflation and its federal funds rate. All of the mentioned indicators will have different effects on various investments. More →

  • 24 Jun
    How to Prepare Your Portfolio For The Next Recession or Stock Market Crash

    How to Prepare Your Portfolio For The Next Recession or Stock Market Crash

    • The risks of a slowdown are higher than the upside.
    • Fundamental trends are negative in advanced economies while emerging markets show higher growth rates and are cheaper.
    • It is important to create a diversified portfolio with uncorrelated assets.

    Introduction

    In an environment where it seems maximum potential for the U.S. economy has been reached, the St. Louis FED chief, James Bullard, has said in his most recent report that he favors only one interest rate increase through 2018, which would at best keep things stable. His view is further supported by the fact that the unemployment rate is sitting at below 5%, and the Personal Consumption Expenditures PCE inflation—measured by the Dallas FED—is at 1.84%, both of which signal that the economy has reached its maximum potential. More →

  • 23 Jun
    Will There Be A Long Term Impact To The Fed’s Shift In Rhetoric?

    Will There Be A Long Term Impact To The Fed’s Shift In Rhetoric?

    • A positive outlook seems more political than realistic as the FED is out of maneuvering power.
    • Keeping interest rates unchanged is the best and the only thing the FED can currently do.
    • Low interest rates will weaken the dollar, boost exports and increase corporate earnings in the upcoming earnings season.

    Introduction

    In FED’s Chairwoman Yellen semiannual policy report, the rhetoric has significantly changed since the last report in February. In short, the full employment target is almost reached but the inflation rate is still below the targeted 2% and the expectations for the reaching of that target have been changed from short term to medium term. Further, the latest job reports show a slowdown in jobs increases which creates a bit of a scare. The FED estimates the slowdown to be transitory. More →

  • 16 Jun
    Time To Get Smart About Stock Picking – Find Out Why

    Time To Get Smart About Stock Picking – Find Out Why

    • An aging population diminishes GDP growth and US GDP growth is bound to further decline.
    • Fertility rates are at an historical minimum and the labor force participation is falling.
    • Corporate earnings growth is correlated to GDP growth.

    Introduction

    One of the worries for the stock market apart from interest rates and a slump in commodity prices is baby boomers retiring and selling their stocks in order to fund retirement. As the fertility rate is falling, the worry is that there will be less people standing in line to buy those shares. More →

    By Sven Carlin FED Investiv Daily
  • 13 Jun
    Do You Feel 50% Richer than 7 Years Ago?

    Do You Feel 50% Richer than 7 Years Ago?

    • US net worth has been increasing due to asset price inflation.
    • Asset price inflation has been influenced more by cheap money and less by GDP that has been growing on debt based consumer spending.
    • As the FED is out of firepower to protect the markets and the economy from any shocks they have no downside cushion.

    Introduction

    On June 9 the FED released its quarterly Financial Accounts of the United States. The report shows the total of accounts for various things, from net household worth, debt per segment, consumer spending to the general flow of funds. Unlike the usual newspaper that focuses on easy to reproduce single pieces of information, this 196-page report gives a clear picture of what is going on in the US economy, the developing trends and therefore has to be well understood by anyone who has an interest in the US economy. More →

    By Sven Carlin FED Investiv Daily US Economy
  • 20 May
    An Analysis of and the Implication of the FOMC Minutes

    An Analysis of and the Implication of the FOMC Minutes

    • An interest rate increase is hanging in the air but no one seems to find enough reasons to pull the trigger.
    • The FOMC expects inflation to be at 2% and interest rates at 2.6% by 2018.
    • Holders of long-term bonds might rethink their positions as interest rate increases could have severe negative repercussions on bond prices.

    Introduction 

    On May 18 the FED released the minutes of the Federal Open Market Committee (FOMC) meeting held in April. The FOMC decided not to increase interest rates in April which gave a short relief to the markets, but an analysis of the FOMC meeting minutes reveals interesting things because it gives indications on the way of thinking FOMC participants have and hints on potential future interest rate increases. While the goal of the FED is to maintain financial stability and increase the resilience of the financial system to shocks, for an investor it is important to look at the economic trends related to the FOMC’s decisions in order to better assess the risks of their portfolio. More →

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