The Federal Reserve is the Most Powerful Organization in the World

This may sound a little strange, but the U.S. Federal Reserve is by far the most powerful organization in the world. I say this because the financial world hangs on every word of a Fed announcement regarding interest rate policy. What other organization can change the course of the U.S. and world stock markets by trillions of dollars based upon a decision on whether to raise interest rates or not? I know of no other.

That being said, three of the Fed's regional bank presidents did not agree with Ms. Yellen and the decision not to raise interest rates on Wednesday. You would have to go back to December of 2014 to see such dissention amongst the group. The Fed did not raise rates, but made comments that show it is leaning toward a rate hike before the end of this year.

As expected, the U.S. and international stock and bond markets both reacted favorably to the Fed's decision to stand pat on interest rates. In addition, borrowers will continue to benefit from low interest rates for the time being. The net impact is global stock and bond markets may increase by billions, if not trillions of dollars in the near term. Who else has this kind of financial sway.....No one!

Looking forward, if the U.S. economy continues to inch upward and employment holds steady or improves, then there is a good chance the Fed will implement a rate hike later this year. However, consensus opinion is a November rate hike is not in the cards due to the upcoming election, which leaves a good chance of a rate hike at the Fed's December meeting. Now that is one heck of a Christmas present.

Bottom line, financial markets and investors are getting too wigged out on the Fed. History has shown repeatedly that the stock market reacts positively to the first couple of interest rate increases, since they are representative of a growing economy, which equates to increasing corporate profits. However, the bond market may not embrace the same way, and we could see some pull back or at the very least see muted returns going forward. Honestly, economically speaking, another one-quarter of a percent increase in interest rates is similar to finding out your temperature has gone from a normal 98.6 to 98.9 degrees. That would not even qualify for an aspirin.

Instead of fretting about the Fed, it makes more sense to enjoy the change of season, cooler temps, make plans on where to go to see the Fall colors, watch the baseball season wind down and football tailgating begin. 

For more on the Fed's recent rate decision, click on the icon below to watch a short explanatory video.

Fed Stands Pat

 

 

 

 

 

 

What to do if You're Hacked

Cyber-attacks / hacking is an everyday occurrence and something that we all need to be very vigilant about. As such, the following is a link to an article regarding a massive hack at Yahoo and all the steps one can take if they’ve been impacted. I highly recommend you taking a few moments to read the article and/or watch the video: What to do if your Yahoo account was hacked

Quotes

Autumn carries more gold in its pocket than all the other seasons."

Jim Bishop

"I would rather sit on a pumpkin, and have it all to myself, than be crowded on a velvet cushion."

Henry David Thoreau

Quotes selected by the IAG staff

“It is not how much we have, but how much we enjoy, that makes happiness."

Charles Spurgeon

Autumn is a second spring when every leaf is a flower."

Albert Camus

 

Tony Moeller, CPA 

The information listed in this commentary is a compilation of various publicly available sources and is for informational purposes only. It is not a recommendation or solicitation of any particular investment or strategy. A risk of loss is involved with investments in the stock and bond markets.

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