I last wrote about the buyback problem two years ago, which shows it has taken a while to show up—and it may continue to simmer. The same holds for profit margins and low interest rates. It’s been a while, but the fact that rates have continued to drop over that time period has meant that policy support of the market continued. Now that we may see rates start to increase, or at least not drop further, the trend is poised to change.
This will make top-line growth—both economic and company revenue—all the more important to both the Fed and the stock market. As I said yesterday, I believe this will become the headline issue very quickly, more so than either employment or inflation. Both of those areas are more or less where they should be and moving in the right direction.
Growth remains the missing link, and that is what we should be focusing on when the Fed issues its statement this afternoon.
Brad McMillan is the chief investment officer at Commonwealth Financial Network, the nation’s largest privately held independent broker/dealer-RIA. He is the primary spokesperson for Commonwealth’s investment divisions. This post originally appeared on The Independent Market Observer, a daily blog authored by McMillan.