Europe is front and center but investors and corporate planners are to remain anchored, not to ignore other key dynamics which have not gone away and will help define the US economic landscape ahead. One of these is Fed policy. Naturally clients need to know how to figure policy into the equation.
We are more constructive than most others on the US economy but in spite of, not due to recent Fed activity. We predicted QEII would simply fire inflation and less-deserving equities. Most now understand that was the result. We noted that "twist"would accomplish little past some trading opportunities. The jury is still out but will no doubt return with our verdict.
One of the most qualified of Fed officials is Jeff Lacker, president of the Richmond Fed. Speaking recently of QEII and Twist, Lacker noted: "The effects of these operations is uncertain, but is likely to be relatively small. My sense is that the main effect will be to raise inflation somewhat rather than increase growth," he argued in his prepared remarks and noted a risk of inflation to the upside.
Agree.
Lacker said MBS purchases, which got a fresh boost in September as the Fed decided to reinvest maturing mortgage bonds back into that market, were not well-advised. "It's simply inappropriate, in my view, for a central bank to attempt to channel credit toward some economic sectors and away from others," he said.
Correct again. These types are not planners; nobody is; it doesn’t work.
Thus investors and corporate strategists when setting strategy for H1, 2012 are not to include recent Fed policy change as a spark but as a wash at best, if not a retardant.
Robert Craven
We are more constructive than most others on the US economy but in spite of, not due to recent Fed activity. We predicted QEII would simply fire inflation and less-deserving equities. Most now understand that was the result. We noted that "twist"would accomplish little past some trading opportunities. The jury is still out but will no doubt return with our verdict.
One of the most qualified of Fed officials is Jeff Lacker, president of the Richmond Fed. Speaking recently of QEII and Twist, Lacker noted: "The effects of these operations is uncertain, but is likely to be relatively small. My sense is that the main effect will be to raise inflation somewhat rather than increase growth," he argued in his prepared remarks and noted a risk of inflation to the upside.
Agree.
Lacker said MBS purchases, which got a fresh boost in September as the Fed decided to reinvest maturing mortgage bonds back into that market, were not well-advised. "It's simply inappropriate, in my view, for a central bank to attempt to channel credit toward some economic sectors and away from others," he said.
Correct again. These types are not planners; nobody is; it doesn’t work.
Thus investors and corporate strategists when setting strategy for H1, 2012 are not to include recent Fed policy change as a spark but as a wash at best, if not a retardant.
Robert Craven
No comments:
Post a Comment