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Focusing on the “Fed”

Focusing on the "Fed"

 

By Michelle McKinnon, Financial Advisor

There has been so much talk in the news lately about the Federal Reserve, or “Fed” as it’s commonly called. The Fed was created by the U.S. Congress in 1913 to study and implement monetary policy. As an independent entity, its decisions don’t need to be ratified by any sector of the government, but the organization is subject to Congressional oversight.

Three Keys:
1

The Federal Reserve determines whether interest rates will be raised or lowered

Future market performance based on these decisions is difficult to predict

If a market decline occurs, it represents a great opportunity for investors to buy

So a few weeks ago the Fed decided to not raise interest rates, which has generated many questions. Was it a good decision for the market or a bad one? Was it politically motivated? Let’s break down what happened. For a couple days after the Fed announced its decision, the market actually did very well.

By extension, can we predict that markets won’t do well if Federal Reserve Chairperson Janet Yellen decides to raise rates in December? Well, I say this time and time again but the truth is that nobody can predict the unpredictable. There could actually be a situation where she decides to raise rates, which she’s leaning toward, and the markets fall for a couple days but then rally for the following two months.

So my advice would be to not sit on the sidelines trying to predict whether the Fed will raise rates and what impact that decision might have. The same principle applies to the upcoming Presidential election. At Payne Capital Management, we use the term “financial pornography” about blatant speculation regarding future market performance that’s just designed to get people’s attention.

Frankly there’s a ton of “junk” out there in the media about what effect the election will have and whether we’ll be looking at another stock market decline like in 2008. Well I can tell you right now, particularly for those readers who are long-term investors, market corrections are normal. And if a correction happens, what do we do? We buy, because that’s just smart investing.

 

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IMPORTANT DISCLOSURE INFORMATION
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Payne Capital Management, LLC), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Payne Capital Management, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Payne Capital Management, LLC is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Payne Capital Management, LLC’s current written disclosure statement discussing our advisory services and fees is available for review upon request.