Wood agrees, arguing that active management best suits the current economic environment.
“Advisors should tell their clients that the uncertainty and volatility is a reminder of why one needs to be properly allocated and diversified,” Wood says. “Bonds have gone downward, the Reserve along with the European Central Bank and the Bank of Japan have told us that this is going to be a low-yield environment for the long term. That suggests that clients should consider globally diversified, actively managed, multi-asset strategies.”
For clients at or near retirement, advisors should contrast the Fed’s behavior in recent years with the response during previous periods of inflation, Wood says.
“The experience they’ve had with inflation in the 1970s isn’t going to be typical of the experience that they’ll have going forward,” Wood says. “Someone in their 30s or 40s has had virtually no experience with inflation, but a person in their 60s probably remembers what it was like, that will create different responses to the current monetary policy.”
Siomades says that he understands the Fed’s decision, but is concerned about inflation.
“Yes, the economy is healthy, but it’s not manifesting itself in inflation,” Siomades says. “Commodity and energy prices are down, and there’s all of this global tension. The Fed has always been a little myopic about how it looks at the U.S. economy versus the global economy. Hearing them say something that wasn’t entirely focused on our country, it shows a huge step in the Fed growing up.
“They weren’t so much saying we have an issue with the U.S. economy, we have an issue globally, and that we need to do our part to make sure the global economy is stable. Hopefully, that will benefit us.”
At the deVere Group, CEO Nigel Green says the Fed’s decision, while likely welcomed by foreign economies, could also initiate an increase in volatility abroad.
“The U.S. economy is no longer in the Emergency Room, so by not raising interest rates, the Fed is, in effect, sending out a clear message that it is nervous about China, and the impact a potential hard landing could have on U.S. and global growth,” Green said in a statement on Thursday. “This concern over global developments is bound to prompt uncertainty too.”