Fed in Focus
Today we are talking about the Fed and how they are back in focus. We had a busy week last week in that last Thursday could have been considered “SuperThursday” as Comey testified in the ECB, leaving rates unchanged. There is also a lot of uncertainty with the UK election and the results. The good thing is that in the last couple weeks the market has been really good at shrugging off all the noise and a lot of that has to do with strong earnings season we just had.
This week is about the Fed. The Fed is back in focus. The last few meetings we feel like we have had a good idea of what was going to happen. In June, the market was fairly confident we were going to have a 25 basis point hike in the fed funds rate and so that was really priced in. It’s not likely that this meeting will be hugely impactful. It’s after this point that we aren’t really sure what to expect. Is the Fed going to raise rates again? Are they going to reduce their balance sheet? What happens from here? The unknown that Janet Yellen could likely be removed early next year which might cause the Fed to re-insert their influence on the markets. They have been put on the backburner by earnings. Also, the fiscal side of politics have taken on a lot more of the due cycle and, as previously stated, might use this meeting to re-insert their influence.
Bond Reinvestment Policy
We were talking about this earlier. It could possibly be September or October when they stop the bond reinvestment policy. So you will have a more mild impactversus rate, but an impact nonetheless. We talked a couple weeks ago about how rate hikes really haven’t influenced individuals because it hasn’t impacted mortgages or corporate bond rates. Also, that balance sheet will have a much bigger impact and that will give them two tools in the fall. Right now, they have only one in interest rate hikes and two tools adds another layer of uncertainty.
Last week we really focused on infrastructure and the importance of that infrastructure to our future economic growth. Because of the Comey testimony we felt like we got a little lost in the news. What was interesting about that was that there was about one trillion dollars that was announced in infrastructure. About two hundred billion of that is truly through the government. The other eight hundred billion, which is unique but we like, is that Trump is looking at really privatizing that. The plan is sending it out to the private sector by making the regulatory process easier. What we primarily mean by that is the permitting process. The permitting process has been so long on these infrastructure projects that it ultimately hasn’t helped much. They are trying to greatly shorten the permitting process within the private sector so that it will speed up the project completion and thus the multiplier effect on the economy.
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Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
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