Investors Weren’t Happy With Central Banks Last Week
After the Federal Open Market Committee (FOMC) meeting, Federal Reserve Chair Jerome Powell confirmed the economy is recovering more quickly than anticipated:
“With the reopening of many businesses and factories and fewer people withdrawing from social interactions, household spending looks to have recovered about three-quarters of its earlier decline…The recovery has progressed more quickly than generally expected, and forecasts from FOMC participants for economic growth this year have been revised up since our June Summary of Economic Projections. Even so, overall activity remains well below its level before the pandemic and the path ahead remains highly uncertain…We remain committed to using our full range of tools to support the economy in this challenging time.”
Investors weren’t satisfied. Colby Smith of Financial Times reported stocks, “sold off sharply during Mr. Powell’s press conference on Wednesday, and again on Thursday,” because the FOMC did not provide information about “how it might adapt its balance sheet policy to generate…inflation and aid the U.S. economic recovery.”
The Bank of England (BOE) also delivered news that unsettled markets last week. Minutes from the BOE’s latest meeting noted it was studying negative interest rates. Some banks and analysts interpreted this to mean the bank intends to implement negative rates. Eva Szalay and Chris Giles of Financial Times reported, “People familiar with the matter said the preparations now under way were aimed more at fully understanding the effects of negative rates, rather than at seeking to implement them.”
It’s possible the BOE wants to better understand negative rates so it’s prepared for a worst-case scenario, such as the economic impact of COVID-19 containment measures combined with failure to reach a trade agreement with the European Union (EU), reported David Goodman and Lucy Meakin of Bloomberg. The EU trade deadline is fast approaching and, currently, no deal seems likely.
In the face of uncertainty, markets are likely to remain volatile.
On September 17, the 30th First Annual Ig Nobel Prize Ceremony was broadcast online. Here’s a fun fact: The 1995 Ig Nobel Ceremony was one of the first events videocast on the Internet.
The Ig Nobel Prizes “celebrate the unusual, honor the imaginative – and spur people’s interest in science, medicine, and technology.” The ceremony is organized by the magazine, Annals of Improbable Research, and is co-sponsored by the Harvard-Radcliffe Society of Physics Students and the Harvard-Radcliffe Science Fiction Association.
This year’s winning research explored ideas that make people laugh and think. The winning research included:
Anyone can learn more about why the researchers were exploring these ideas. Alternatively, 24/7 Ig Nobel lectures are available during which the winners explain their topics twice. First, they are asked to deliver complete technical descriptions in 24 seconds. Then, they try to offer clear summaries that anyone can understand in just seven words.
“…I’m dejected, but only momentarily, when I can’t get the fifth vote for something I think is very important. But then you go on to the next challenge and you give it your all. You know that these important issues are not going to go away. They are going to come back again and again. There’ll be another time, another day.”
--Ruth Bader Ginsburg, Supreme Court Justice
Marilyn Suey is a registered representative with, and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Strategic Wealth Advisors Group, LLC, a registered investment advisor. Strategic Wealth Advisors Group, LLC. and The Diamond Group Wealth Advisors are separate entities from LPL Financial. CA Insurance License #0E01981.Securities offered through “Your B/D Name Here”, Member FINRA/SIPC.
* These views are those of Peak Advisor Alliance, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.* This newsletter was prepared by Peak Advisor Alliance. Peak Advisor Alliance is not affiliated with the named broker/dealer.* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.* All indices referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.* Past performance does not guarantee future results. Investing involves risk, including loss of principal.* You cannot invest directly in an index.* Consult your financial professional before making any investment decision.* Stock investing involves risk including loss of principal.
https://www.ft.com/content/91bd3435-2439-4787-a013-26eade1067bf (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/09-21-20_FinancialTimes-Investors_Vent_Frustration_Over_Feds_Balance_Sheet_Inertia-Footnote_2.pdf)
https://www.ft.com/content/5a6ecbce-f88a-4de7-89ae-59f49bf8f831 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/09-21-20_FinancialTimes-Bank_of_Englad_Upends_Market_Expectations_with_Comments_on_Negative_Rates_Footnote_3.pdf)
https://www.bloomberg.com/news/articles/2020-09-18/no-deal-brexit-may-be-the-trigger-for-boe-s-journey-below-zero (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/09-21-20_Bloomberg-No-Deal_Brexit_May_Be_the_Trigger_for_BOE_to_Use_Negative_Rates-Footnote_4.pdf)