Communication breakdown, it’s always the same
Communication breakdown, it drives me insane
~ Led Zeppelin I
Are you confused about the Fed’s actions? Weren’t they supposed to hike rates in early 2015, then late 2015, now mid-2016 or maybe not at all? What is the logic behind this constant flip-flopping? What does it mean for your practice? Let’s attempt to answer those questions.
Call Me The Maestro
Do you remember Alan Greenspan, the Maestro? The man who so mastered the skill to speak for hours while appearing to earnestly answer questions, but who rarely gave away any substance. All that ambiguity was supposed to have been eliminated as the Fed planned to provide clear guidance for the markets—a new, open Fed of Ben Bernanke and Janet Yellen. But as of late, market participants are more and more confused about the Fed’s future actions and, more importantly, the logic behind them. Promised hikes never materialized and now there is talk of not hiking until mid-2016 or even later. Market participants are completely confused. Look at results of the RBS survey in the picture below. RBS asked its institutional clients two questions:
Question 1: Is volatility going to continue increasing?
Question 2: How do you account for the Fed’s actions when creating plans for your clients?
'Communication Breakdown' As The Fed Loses Street Cred
October 28, 2015
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