Personalities who present the financial news on TV, investment gurus, and journalists covering the business beat for newspapers, all seem to be grasping at straws these days—trying to fill-in air time or page space. Much of the world, however, has been focused on the Climate Change Conference in Paris over the past couple of weeks. And the markets are mostly quiet!
Otherwise, nothing much has changed, at least not that wasn’t on our radar screens before the financial markets began their swoon on December 4th. In fact, today the Dow Jones Industrial Average ended the day UP by 103.29 points, to close at 17,368.50. That’s quite a bit higher than during last August’s market “correction” (a ten percent decline). Although the Dow still remains 3.4% below its 2014 Year-End close, that difference would just be considered part of the normal ebb-and-flow of the financial markets. There is nothing magic about either Year-End or Month-End Prices!
So, when nothing new of any consequence is going on, and the world has been mostly focused on the climate, that’s when just plain old “uncertainty” can creep into the mix. From my observations over the years, I believe that many market participants can actually accept bad news better than uncertainty. That’s because they can make adjustments for negative events; but, they just don’t like not knowing what might come next. But, what I find particularly frustrating these days, is that we do indeed know what to expect, the options and the limited severity. the Fed has telegraphed them several times over the past few months.
As the Media searches for something to talk or write about, invariably they keep coming back to the Fed’s Open Market Committee meeting which begins this Tuesday and will end, like clockwork, at 2:00 PM on Wednesday. The big question seems to be: “Will they, or won’t they”…raise rates? Fed Chair, Janet Yellin, has even recently confirmed that the FOMC probably would raise the “Fed Funds” Rate (which banks charge each other for overnight loans of excess reserve cash) at this meeting. But, promptly at 2:15, Ms. Yellin will announce the Committee’s decision, explain the rationale behind the change(s), if any, and then answer journalists’ questions.
The Fed Funds Rate has been maintained between 0.00% and 0.25% since 2008. Chairman Yellin has also suggested that, if and when, the Fed does raise rates, it would do so deliberately, very gradually and that she expected them not to rise substantially in the near future. So, why all the hand-wringing?
Recently, I have had several people, perhaps investors who only look at their portfolios on an occasional basis or, maybe they heard or read about the recent market slide, and didn’t place things into any sort of rational context. By all means, review your portfolio if you have concerns and speak with whomever you look to for investment advice. If they are recommending a number of major changes, however, I would suggest getting a second opinion. Or perhaps another broker! Some investment salespersons just see market volatility as a chance (for them) to generate commissions!