Did you know today was the first FOMC meeting of the year?
Even if you did know, you probably weren’t all that worried about it. To some extent, that’s a good thing. After all, the Fed and monetary policy have played a far-too-important role in determining the fate of equity prices over the past eight-plus years.
Now, of course, the markets are all about politics and the daily pronouncements coming out of the Oval Office.
I’m not sure what’s worse — being worried about Janet Yellen or worried about Donald Trump — but we’ve collectively transitioned from hanging on the former’s every word to hanging on the latter’s every word.
Today, however, it was a bit more about the Fed than the president. And that’s probably the way it should be, given the FOMC statement release.
In that release, the Fed gave virtually no hints about the future direction of interest rates. Instead, Yellen & Co. said the central bank remains on track to gradually raise short-term interest rates this year.
The FOMC also unanimously held their benchmark rate steady in a range between 0.50% and 0.75%. Although the statement did acknowledge that there have been recent improvements in the economy.
So, what’s next for the Fed and the fate the cost of capital?
|Image credit: wikipedia.org|
According to the Fed Funds futures, traders are pricing in a 25% probability of a rate hike at the Fed’s next meeting on March 14-15.
For that to happen, I suspect the data on jobs, inflation and GDP will have to really heat up. If it doesn’t, then the Fed will likely phone in a repeat of today’s statement.
But enough with the Fed, the White House and even Wall Street for now. How about we turn to what you have to say about two of our recent articles?
Regarding Tuesday’s article, “Welcome to President Trump’s New War on Drugs,” regular reader and frequent commenter Jeff writes:
The best way to reduce the cost of drug prices is through tort reform. This can be done through: 1. Reform laws to require that there be a fee charged by the law firm whether they win or lose the lawsuit. 2. Sign Off — An individual must sign a form before getting a prescription med that states that they understand that there are risks, but they want to take that risk. 3. If it saves you from the initial disease, other side effects are not compensable (i.e., if it saves you from cancer, but you don’t regrow hair — no lawsuit).
Brad response: Thanks for your always-thoughtful feedback, Jeff. I agree that tort reform would do a lot to help reduce the cost of prescription drugs. Yet it’s not just drugs that would benefit from tort reform. If President Trump really wants to unleash the entrepreneurial animal spirits, broad-based tort reform would be a fantastic start.
Regarding Monday’s article, “Immigration Kerfuffle Masks the Real Reason Stocks Fell,” reader Billy, also a frequent contributor to the feedback threads, reminds us:
Bottom Line … from a Macro-Economic Fundamentals, Technical, Cyclical and Demographic standpoint, the capital markets are OVERSTRETCHED even in the most-conservative of estimates. This really has very little to do with Trump other than a couple of months riding the perceived benefits of lower taxes and lower regulation, which take a long time to trickle down. Of MUCH more importance are the items I mentioned above, which has led to a world literally CHOKING ON DEBT that is the REAL problem!
Brad response: Billy brings us back to one of the biggest issues facing the world, issues that not many politicians like to bring up — and that is the issue of crushing global debt.
I worry about the negative effects of global debt all the time, because that’s my business. Still, it’s hard to convince the average man on the street that the debt overhang his government owes is keeping him from the kind of economic growth that’s possible had government not grown into an uncontrollable federal leviathan.
So, Billy, thanks for reminding us about what really matters.
Last night’s positive earnings report from Apple (AAPL) provided a much-needed lift to stocks. Markets surged 100 Dow points early Wednesday morning after booking back-to-back triple-digit losses. The Industrials closed in the black today with a 0.1% gain.
• AAPL got rewarded for its return to profitability in its fiscal Q1 with a 6.1% surge that took the stock to a new 52-week high.
• Alphabet (GOOGL) is now the world’s most valuable brand, with a $109 billion market cap vs. AAPL’s $107 billion.
• Facebook (FB) also has a lot to smile about: Shares gained 2.2% during the day and another 2.2% after-hours as the market digests its surge in Q4 earnings and sales.
• Want to move to the happiest state in the U.S.? Pack your bags for Hawaii, which topped Gallup-Healthways’ annual survey of well-being. (However, if you want to retire rich, Hawaii is literally the last place you want to go, according to GOBankingRates.)
• Gallup says Kentucky, West Virginia have the lowest well-being scores. Could that change now that Amazon.com (AMZN) chose Kentucky as the spot where it plans to build its first air-cargo hub … a move that is set to create more than 2,000 new jobs in the Bluegrass State?
• May gets Brexit blessing: Parliament voted 498-to-114 to give UK Prime Minister Theresa May the power to trigger Article 50, which will get the Brexit ball rolling. The bill now moves to the Commons and House of Lords before it is expected to become law.
Good luck and happy investing,
Uncommon Wisdom Daily