The Fed punts again on raising interest rates

  • “…in light of the heightened uncertainties abroad and the slightly softer expected path for inflation, the committee judged it appropriate to wait for more evidence, including some further improvement in the labor market, to bolster its confidence that inflation will rise to 2% in the medium term.” – Fed Chair Janet Yellen, after the Fed’s Open Market Committee meeting on 9/17/15, explaining why it decided not to raise short-term interest rates. Read more.
     
  • “The Fed continues to stick to its guns that it wants inflation to hit its 2% target. And yet it is clear to so many people that the inflation metrics the government issues just don’t reflect life in the supermarket for most people. The effect of rising prices is obvious in most things I spend money on....It’s clear that not even the Fed thinks the stated unemployment rate is worth much. Economists know the official 5.1% rate from the government doesn’t reflect what it used to before the financial crisis. Then it would be an indication of a strong labor market. Now, not so much because millions of people have simply given up looking for work.” – Forbes Contributor Simon Constable, on 9/18/15, questioning the metrics the Fed is using in its decision-making. Read more.
     
  • “There had been warning signs that the economy was not as strong as it initially seemed. Just the same, there had been growing confidence the U.S. economy was on strong footing and that not even China or a Fed interest-rate hike could stop that upward trajectory. In essence, the Fed’s recent statements cast considerable doubt over that line of thinking. Instead, the central bank gave some credence to the idea that the current economic expansion may be closer to the end of its run, rather than in the middle. And that got the market worried.” – Stephen Gandel, for Fortune on 9/18/15, on the market’s decline following the Fed’s decision not to raise rates. Read more.
     
  • “I’m sorry to the retirees that have saved their whole lives. I’m sorry to the generation of young people that don’t know what the benefits of saving [are]. I’m sorry to the free markets that best allocate capital. I’m sorry to pension funds that can’t grow assets to match their liabilities. I’m sorry to the successful companies that are competing against those that are only still alive because of cheap credit. I’m sorry to those industries that have seen a pile of capital (aka, energy sector) enter their industry and have been or will see the consequences of too much capacity. I’m sorry to investors who continue to be bullied into making decisions they wouldn’t have made otherwise. I’m sorry for the bubbles that continue to be blown. Again, I’m sorry to those who don’t want to hear this.” – Peter Boockvar for The Lindsey Group, an economic advisory firm, in a note to clients on 9/17/15, expressing his frustration with the Fed’s decision. Read more.

Sizing up a possible bear market

  • “The lessons of the long bull market are, in truth, lessons for the next bear market. Although the common investment dream is to be brilliant enough to dodge the bear, for most investors the real opportunity lies instead in being positioned to catch the next bull. Six years ago, too many people listened to what might go wrong, rather than think about what could go right.” – John Rekenthaler for Morningstar on the importance of not overreacting to the market’s recent downturn. Read more.
     
  • “Bearishness has reached an extreme not seen at least since the top of the Internet bubble in early 2000. Yet this is a bullish omen, according to the inverse logic of contrarian analysis: Extreme levels of bearishness indicate that there is a very robust ‘wall of worry’ for the market to climb.” - MarketWatch Columnist Mark Hulbert, 9/25/15, on how contrarians view current market sentiment. Read more.