 |
Is it time to start thinking about buying fewer Treasurys and mortgage bonds? Or raising interest rates at some point during the Biden administration’s first term?
Wall Street anxiously awaits the Federal Reserve’s answers. And, in a few short hours, it’ll get them.
That’s because the Federal Open Market Committee (FOMC) concludes the fourth of eight regularly two-day policy meetings today, and Fed Chair Jay Powell steps before a press conference podium to provide some guidance.
But don’t expect much. And it’s unlikely there’ll be much market turmoil, either.
You know from my previous updates that the Fed’s monetary policy approach is helping to cause major headaches. Out-of-control real estate markets. Rampant asset inflation. Rising producer and consumer prices. Reckless borrowing and lending on Wall Street.
Heck, The Wall Street Journal weighed in yet again on one of my favorite topics — the Fed-fueled corporate debt bubble — earlier this week.
The piece, “Pandemic Hangover: $11 Trillion in Corporate Debt,” listed all the ways American companies have binged on cheap, easy money.
By doing so, they’re trashing their balance sheets and laying the groundwork for serious problems down the road.
But, on some level, this is what the Fed wanted to happen.
After all, it’s openly committed to behaving irresponsibly. It’s freely admitted it’ll keep policy too easy for too long.
And it’s demonstrated it’s scared of its own shadow when it comes to markets, acting as if something like a 10% correction would be the end of the financial world.
Fed officials believe their approach is the right one — and a responsible one — for the economy. They’ve said repeatedly that the growing laundry list of side effects isn’t too concerning.
So, given all that, why would Powell do a 180? Signal that the Fed is going to radically change course?
That would be completely illogical. The most likely approach is more of the same: talking about staying the course, keeping policy extraordinarily loose and issuing nothing more than a few tame platitudes about risk.
Again, it doesn’t matter what I think the Fed should do. This is what I think the Fed will do.
All you can do as an investor is try to capitalize on this policy approach while you can. Build up a nest egg of wealth now, while Wall Street is playing along and ignoring future troubles.
But be sure you do so in a “safe money” fashion. That way, you’ll be prepared for the moment when the market climate changes.
And mark my words, it will.
Until next time,
Mike Larson
