#181: Will The Fed Throw The Flag And Cause Market Volatility?

The Fed referee is making penalty calls

The markets can be viewed as a football field. You may have your portfolio or team on the field. The Fed is the referee and the Fed can pull out the flag and call a penalty. We are seeing a lot of market volatility because the Fed has been making a lot of penalty calls recently, especially on this past Friday.

market volatilityMarket volatility penalty flags

Just like in a football game, when the Fed throws a penalty flag, that is just a moment in the game. It is not a long term result of the game. It can be a good or a bad call. This is what we are trying to determine right now as we move through the fourth quarter of this year.

Is this Fed rhetoric or will they take action?

We saw some market volatility and a big pullback in the market on Friday. Two Fed governors, who in the past have been dovish, came out and said that an interest rate hike seemed appropriate. This caused the volatility and pullback.

market volatilityThe power of the Fed

A longtime Fed advisor, John Faust, has reminded the world that Janet Yellen is the only one who can speak for the Fed. She is the head referee and can overrule any call from the “booth.” So when you hear any Fed governor talk, you have to be very careful about how you listen. Faust believes they could be explaining the Fed or lobbying the Fed. It could be one of the two or a little of both.

market volatility Fed speeches today

Traders did not know that the Fed would be speaking today until Thursday. This has caused traders to focus on that. The Federal Open Market Committee will meet next week so there will be a blackout period from Tuesday morning until then on any kind of Fed communication. The speeches today will be analyzed over and over again throughout this silent period. This could bring more market volatility.

market volatilityIt’s not the end of the game

If there is an interest rate increase, investors need to remember that it is a moment and not the end of the game. It may cause volatility in the markets but the system will digest that and we will move forward. The Fed is also in the position where they do not want to see a bubble created from the complacency in the markets. This bubble could be created by stocks being the only place to find paying dividends, not because the valuations are appropriate. People are just trying to find a place to get income.

These are unprecedented times. We are going to keep you updated. If you have any questions or concerns, please send us your comments or call us at your convenience.


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Greg Powell, CIMA
Wealth Consultant
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Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
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Bobby Norman, CFP®, AIF®
Senior Vice President
Wealth Consultant
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Trey Booth, CFA®, AIF®
Vice President
Senior Vice President
Email Trey Booth here

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.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

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