By D. Scott Peterson
My weekly talking points are snippets of ideas that are pertinent to today’s markets. They come from my readings, American history background, and from 30 years’ experience trading and investing in the American Capital Markets. They are designed to help you improve your investing decisions and get beyond the flood of information (we call this noise) from the media, most of which is counterproductive. Review these periodically, they will help improve your investment choices.
1. The Federal Reserve did not raise interest rates last week citing uncertainty in the global economy as the reason. In response, the market gave up all the gains it made prior to the announcement.
2. Investors are concerned that the Fed thinks that the economic landscape is so uncertain here in the U.S. and abroad that they’re afraid to raise rates.
3. What’s really going on?
4. The economic picture is clearly muddled. Unemployment is low and there is steady economic growth, but the U.S. economy is still not what it should be at this stage of the recovery. And the global economy is not good.
5. The market is just trying to reconcile all this. And this is usually not the best time seasonally.
6. There are 2 other reasons that the Fed didn’t raise rates.
7. The first is historical: The Fed raised the rates in the late 1930’s just as the economy was starting to come out of the great Depression. The U.S. economy went into a deep recession as a result.
8. The second is the Fed knew that 7 countries, the European Central bank and Sweden among them, raised rates once their economies started to recover. It didn’t work. They ended up reversing their policy and dropped rates back down again because their economic recovery started.
9. It will take some time to digest all this but we are getting close to the best seasonal time of year-November-March.
10. At PWM, we are busy using this volatility to build positions.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations of any particular security, strategy or investment product for any individuals. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.