Friday, September 18, 2015

The Fed Non-Move and the Stock Market

Yesterday the Federal Reserve maintained its zero interest rate policy and after briefly rallying stocks sold off sharply and the decline accelerated this morning, What gives? There are two possible explanations for this market behavior. The first is that the Fed is really frightened about the prospects for the global economy. What do they know that the market doesn't? Second by introducing an international mandate, by the way something that does not exist in the Federal Reserve Act, the Fed introduced a new uncertainty into its policy making. Simply put it would seem they are making it up as they go along making it nearly impossible for market participants to make an informed judgement about the future course of policy. Either way this is a recipe for low multiples.

No comments:

Post a Comment