INSIGHTS
JAN
28
COSTA’S CORNER
Same old story, same old song and dance, my friend
With thanks to Steven Tyler and Joe Perry. Seems now that Davos is over, and the shutdown is history we can focus on the same old things:
Earnings, Fed meeting and some global tension somewhere.
While earnings season is rolling along, I think it’s important to focus on the Federal Reserve meeting this week.
The consensus is that there will be no change to interest rates this time around and I have to agree with that.
While I have been pretty vocal in my feelings surrounding rate hikes (If you can’t recall, I didn’t think there should be any hikes. Why try and slow a growing economy?), it seems that the rising interest rate environment has not slowed the economy down and reduced spending. We have been on a very steady growth angle and that scourge of growth, inflation, has barely peaked its ugly head so it seems the Fed has everything under control.
While the Fed has been diligently mining all the data and using whatever Dot-Matrix models they use, the economy still is in very good shape and we should have a couple more quarters of solid earnings growth.
I find it highly unlikely we see a rate hike this week and I think Chairman Powell’s interview on Wednesday will pretty much be, “We are monitoring various components and keeping a very keen eye on developments inside the US economy and on a Global Scale.”
The question on everyone’s mind will be, “what does the future rate environment look like?” Once again, Chairman Powell will give no specifics and off we go, until the next Fed meeting.
I have something for you to think about. The Fed and every economist that has ever gotten his five minutes of fame on CNBC or Fox Business has said that we are heading back to normalizing interest rates. Interesting since we have been at historically low interest rates for over nine years, doesn’t that make this environment the “New Normal”?
What is considered normal interest rates? The 5% level that we had from 1998 to 2003? Why is that the place we should be? Granted, interest rates were forced down during the financial crisis, but they have stayed at this level longer than any other time in our history. I say this environment is the new normal and we should stay here unless something catastrophic happens.
I also understand the lesser told story of rising interest rates and it does make sense. If we do go into some sort of recessionary period, the Fed has some room to maneuver to get the economy going again, it can lower interest rates which at 3% or 3.5% is a lot easier to do than it is at 1% or lower.
They want to keep their powder dry as we like to say in the business because that someday will come.
Going to hold pat
50% Stocks
25% Fixed Income
25% Cash
With thanks to Steven Tyler and Joe Perry. Seems now that Davos is over, and the shutdown is history we can focus on the same old things:
Earnings, Fed meeting and some global tension somewhere.
While earnings season is rolling along, I think it’s important to focus on the Federal Reserve meeting this week.
The consensus is that there will be no change to interest rates this time around and I have to agree with that.
While I have been pretty vocal in my feelings surrounding rate hikes (If you can’t recall, I didn’t think there should be any hikes. Why try and slow a growing economy?), it seems that the rising interest rate environment has not slowed the economy down and reduced spending. We have been on a very steady growth angle and that scourge of growth, inflation, has barely peaked its ugly head so it seems the Fed has everything under control.
While the Fed has been diligently mining all the data and using whatever Dot-Matrix models they use, the economy still is in very good shape and we should have a couple more quarters of solid earnings growth.
I find it highly unlikely we see a rate hike this week and I think Chairman Powell’s interview on Wednesday will pretty much be, “We are monitoring various components and keeping a very keen eye on developments inside the US economy and on a Global Scale.”
The question on everyone’s mind will be, “what does the future rate environment look like?” Once again, Chairman Powell will give no specifics and off we go, until the next Fed meeting.
I have something for you to think about. The Fed and every economist that has ever gotten his five minutes of fame on CNBC or Fox Business has said that we are heading back to normalizing interest rates. Interesting since we have been at historically low interest rates for over nine years, doesn’t that make this environment the “New Normal”?
What is considered normal interest rates? The 5% level that we had from 1998 to 2003? Why is that the place we should be? Granted, interest rates were forced down during the financial crisis, but they have stayed at this level longer than any other time in our history. I say this environment is the new normal and we should stay here unless something catastrophic happens.
I also understand the lesser told story of rising interest rates and it does make sense. If we do go into some sort of recessionary period, the Fed has some room to maneuver to get the economy going again, it can lower interest rates which at 3% or 3.5% is a lot easier to do than it is at 1% or lower.
They want to keep their powder dry as we like to say in the business because that someday will come.
Going to hold pat
50% Stocks
25% Fixed Income
25% Cash