Will Monetary Policy from the Federal Reserve Affect Your Portfolio | News or Noise!

Is this headline News or Noise?!

Hey, I’m Chris Perras, Chief Investment Officer with Oak Harvest Financial Group. This is our investment team’s mid-week release when we examine a news item, headline, or story making the rounds from publicly available sources and ask, “Is it News or Noise?”

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So here we go..

Last week the Federal Reserve committee met and announced changes to its monetary policy on Wednesday.   As always, the financial press makes these meetings out to be, and I quote, “the most important Fed meeting in years”.  Well, this time around, they were probably being truthful.  Viewers, the Federal Reserve has finally decided to take the training wheels off its aggressive Covid induced monetary policy.

As a quick recap of the outcomes of the meeting.  First, the Fed kept short term rates unchanged, and they decided to speed up the pace of asset-purchase tapering as expected.  Chairman Powell doubled the tapering speed so that the Fed’s purchasing program will now end in March of next year instead of June.  This would free up the Fed to start raising rates from the current near-zero levels starting as early as the early second quarter of 2022.

On a more micro level, the Feds so called “dot plot”, which attempts to predict the number and path of future Fed rate hikes, now has the Fed raising rates 3 times in 2022, up from the barely one interest rate rise that was predicted only 8 weeks ago at their September meeting.  I remind viewers, that historically, the “Feds Dot plot” as well as the often-quoted number on TV, the “Fed Funds Futures markets” have had little, to no predictive forecasting accuracy beyond the 5 to 10 days prior to the existing Federal reserve meeting.  What does this mean to you?  This means we recommend that you don’t make investment decisions based on these often-quoted data sets.  We will NOT be making decisions based on these data sets for our clients.

Instead, as we have in the past, the team at Oak Harvest will be using existing historical data since this cycle began, with the beginning of the Fed’s QE programs, in combination with real time cues from certain market priced indicators such as forward volatility markets, to warn us of changes in the economic landscape or upcoming air pockets in the markets.  Historically, the markets and economy have experienced bouts of higher short-term volatility as the Fed changes path away from an easing policy toward one of tightening monetary policies. However, during the initial and early tightening process, the markets have still experienced positive annual returns accompanied by higher realized volatility and fast sector rotations.

Viewers, the Feds move last Wednesday, to telegraph its pivot toward a tighter monetary policy, is certainly news in investor circles.  As we started messaging to clients in early November, expect more news items like this from the Federal Reserve as well as increased market volatility for the first half of 2022.

Give us a call here at Oak Harvest and ask to speak to one of our advisors.  Let us help you craft a financial plan that meets your retirement goals and needs first, and your greed’s second. Call us at (877) 896-0040 we are here to help you on your financial journey into and throughout your retirement years.

Link to Article:      https://www.cnbc.com/2021/12/15/follow-along-to-real-time-updates-of-the-big-fed-decision-and-powells-press-conference.html

News or Noise? News!

 

Disclaimer: 

This content contains general information and express the views of Oak Harvest Investment Services. All data, articles, and information cited are believed to be reliable at the time of creation; however, Oak Harvest does not warrant any information contained herein to be correct, complete, accurate or timely.

Oak Harvest provides links to content produced by other websites that OHFG does not control, and Oak Harvest does not necessarily approve or endorse such content and does not guarantee its accuracy. Nothing in this content constitutes personalized investment advice. Any charts, indicators, or graphs included or referenced in this content have limitations, and no such material is able, in and of itself, to provide a buy or sell recommendation for any security. Strategies and ideas discussed may not be right for you, and views and opinions expressed may change without notice. Strategies and ideas discussed will not apply to all client accounts or portfolios.

Nothing in this content constitutes a recommendation, or an offer or solicitation to buy or sell securities. Oak Harvest makes no assurance as to the accuracy of any forecast or projection made. Not all past forecasts or projections were, nor future forecasts and projections may be, as accurate as any forecasts discussed. Indexes like the S&P 500 are not available for direct investment and your results may differ. Past performance is not indicative of future results. Investing involves the risk of loss.