React to the Fed & Grow Your Portfolio: Invest with Value.

The United States Federal Reserve has been trying to boost the economy through maintaining an accommodative monetary policy and providing assurances that the central bank will do whatever it takes to keep the economy afloat. However, this talk of monetary stimulus does not always necessarily translate into a positive reaction from the markets. The recent reaction to the Federal Reserve’s latest statement provides a case in point. At its most recent meeting, the Federal Reserve announced its intention to continue its accommodative stance and reiterated its commitment to using tools available to it in order to support economic recovery. The markets responded to the Fed’s announcement by posting losses, which has raised questions about whether the Fed’s words were enough to stimulate market confidence. The market’s reaction to the Fed’s statement can be attributed to the fact that investors have become jaded by the repeated attempts by the central bank to support the economy through rate cuts and other forms of quantitative easing. In essence, investors are not expecting much from the Fed and are likely looking for more actionable policies such as additional fiscal stimulus to provide the kind of market-moving news that would actually result in a positive reaction from investors. Another factor to consider is the fact that the Federal Reserve’s stimulus efforts have had mixed results in terms of economic recovery and it is likely that investors are not convinced that the latest statement is enough to spur a sustained recovery. In order for investors to have confidence in the Fed’s assurances, it is important that the economy continues on its path to recovery and that the central bank continues to take steps to ensure the sustainability of this recovery. In the end, the Fed’s statement may have been an attempt to talk the market up, but in order for the markets to respond in a sustainable way, concrete action is needed. Therefore, it is important that the Fed and other policymakers continue to focus on finding ways to support the economy in the short- and long-term in order to inspire confidence from investors. Building investor confidence is only possible if the economy is making full use of the tools available to it and putting long-term policies in place that promote investment and sustain economic growth. Without concrete policy changes in place, the markets are unlikely to find the Fed’s promises comforting and may continue to react negatively to such announcements from the central bank. Thinking value should come first, and words should follow.