Somewhere In Between
Sometimes when the financial press discusses the Federal reserve, it’s as if one conjures an image of economic geniuses in flowing white robes walking among the masses waiving confidently just before they ascend to Olympus to dispense their wisdom. For me, and I can’t help it, I simultaneously picture a group of Friday night college kids stuffed in a car drinking bad wine, eating cheese popcorn and swerving around the backroads trying to find their way to the next party. I realize this is a bit pejorative, but it cracks me up, nonetheless. The basic truth is that the Fed is somewhere in between and right now you can see it in their statements/comments. For all the data, PhD economists, I believe, have no clue of where the economic ant farm is headed. So, in the absence of clarity, they will stick to the dogma of raising rates and quantitative tightening. So, for now the stock market and bond market will focus on the Macros (interest rates, dollar strength, events, the Fed). Long term this will be a mistake because many companies are adapting and finding ways to thrive in this environment, but I understand the general negative tone of the market at this point. In this time the right focus should be on the 5 years plus time frame. At a time when people worry moment to moment the smarter money will become investors with a downstream time horizon. The question will be whether people take such a focus.
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