Ok…so the Social Security event forced us to pull together new audio equipment – we never knew how quickly we would utilize these new tools for events such as what follows – We hope you enjoy these pertinent comments directly from the horses mouth!
Unthinkable just a few quarters ago…. Market Participants are thinking there may be a FOMC (Federal Open Market Committee) LOWERING of rates – yep lowering!
This week the FOMC will announce their decision, based on many factors as you will hear from the attached audio – what makes this weeks meeting special is the slight expectation of a lowering of rates and this meeting includes the FOMC estimates of the economy and an interview with chief Jerome Powell post announcement –
Now – what they are looking at to make the decision!
At our recent CFA (Chartered Financial Analyst) sponsored event, we were fortunate enough to have an hour with Robert Kaplan, Dallas Federal Reserve President. We were also fortunate enough to get audio of the event…
What the Fed Watches to make rate decisions
According to Robert Kaplan, Audio below, he along with his fellow FOMC chiefs watch the following, just to name a few items:
Cyclical Factors – Short Term Indicators – Less important to Kaplan – I.e. CPI, Earnings, Interest Rates, Employment rates – basically all the items we read on a daily basis or are bombarded with in “Breaking News! Like format – Interestingly and very correctly from our perch, Kaplan is not a big advocate of placing much weight on these factors – see next as he mostly ignores the short term noise – Wisely in our opinion – see audio below
Structural Factors – Longer Term Trends – MORE important to Kaplan and becoming more important to the entire FOMC board due to his repeated review – I.e. Population growth/demographics, Government Debt, Corporate Debt, TECHNOLOGY INNOVATION (huge importance), World Growth – Again, totally agree – see audio below
Individual Company Response – Kaplan talks to over 30 large and small company CEO’s monthly along with continued in- person visits with companies to help determine, just what the economy is doing along with longer term Structural disrupting factors – see audio below
Group Input – With multiple chiefs from a dozen districts bringing their collective input to the table, a theme hopefully develops!
Here is the Audio in different formats for different devices – with three different types we hope at least one works on your device!
MP3:
Wave File:
OGG File:
Our Thoughts
Our bet is no lowering of rates, which may be met with disappointment (lower markets)!
Have a Great “FED Decision Week” Day!
John A. Kvale CFA, CFP
Rates… Fastest Increase Review … Looking Forward for Effects … Newsletter Precursor …
This is an updated chart from our favorite buds Visual Capitalist…
Last year we spoke of the speed of interest rate increases a lot… given the unique pace at which rates increased AND the super low level of (zero is about as low as you can go) starting point … it became a shock to the financial system….
So in all likelihood, rates are near their top for the foreseeable future….what lies ahead?
We will have more on this in the coming Newsletter but rates 500 times higher than they were just a few quarters ago AND looking to stay higher… there are major implications..
Debt/Financing costs higher =
Better safe investment returns aka Fixed Income/Bonds
More costs to debtors (lower returns for those using debt because of higher costs)
End of companies requiring very low costs to make profits
Have a Great “Fastest Rate Increase Effect” Day!
John A. Kvale CFA, CFP
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Posted in Debt - Debt Management, FOMC, General Financial Planning, Interest Rates, Investing/Financial Planning, Market Comments
Tagged Fastest Ever, FOMC, Interest Rates, Rate, Rate Increase, Visual Capitalist