My interns are smarter than you
- Joshua M Brown
- July 31st, 2013
I’ve now consumed three high-level parsings and interpretations of what the FOMC announced today.
On the surface there is nothing worth noting. It’s the same thing we’ve already been told, there are no hints.
But many “strategists” can’t actually say that, even though they know it. They have to act as though they’re able to divine some kind of actionable insights from the text.
I asked my two college interns, one of whom is majoring in finance and economics, the other in applied physics or something, to read the statement and come out with the key takeaways. The result was better than what I’ve read from the Wizards of OZ from around Wall Street:
These are some of the conclusions that we came to with respect to the Fed’s announcement:
The Fed’s prediction on inflation leads us to believe there is no need to overweight in asset classes that protect against inflation in the long-term.
The Fed points out that inflation lower than the target rate for an extended period of time poses a major risk to investors; though unlikely, this is something investors should keep their eyes on.
The Fed’s forecast of economic growth means you don’t want to put yourself in a position where you could possibly miss out on a rise in asset values.
There is no clear end-date to the Fed’s asset purchasing program; this uncertainty could cause volatility in bond market.
In the long-term, interest rates will rise, so long-term investors should underweight bonds.
Oh I’m sorry, was that too straightforward for you? Not fancy enough?
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.