Today the Federal Reserve Board decided to leave the Federal Funds Rate unchanged. More importantly, they also said that "In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes."
After the December meeting (when the Fed raised rates by 0.25%), we shared that we thought Powell's (and the Federal Reserve Board's) position on future rate increases was beginning to change. We referenced Powell's statement in November that rates were nearing "neutral" territory. We also highlighted that in the December meeting the Fed reduced the expected number of rate hikes in 2019 from three to two because it would take any pressure of needing to raise rates in early 2019 away. We believe the Fed's actions today are consistent with their position over the last few months. Powell did not come out and directly state that there will be less than two rate hikes this year, however, his statement suggests that there MAY NOT be two rate hikes this year, and towards the middle of the year, if the Fed's comments continue in the direction they are on, it will be no surprise when they do make that announcement.
We also wanted to reiterate that while the Fed is seeing less need to continue increasing interest rates, the data they have gathered indicates that the U.S. economy continues to be strong, saying "Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier last year."
We believe much (if not most) of the moderation in the growth of business fixed investment stems from the trade dispute with China. Businesses like to have stable, long-term projections in place before engaging in long-term investments, like building factories or warehouses. This is important, because the outcome of the current trade dispute leaves so much uncertainty, that we would expect most corporations to slow down their rate of capital expenditures pending a resolution. Essentially, corporations are keeping their cash on hand should an "opportunity" arise.
If China and the U.S. are able to come to a resolution this year, we believe the rate of capital expenditures could increase very quickly. After a trade agreement, new analysis would be done showing that costs remain in check. Additionally, we would expect consumer sentiment to increase, which should ultimately lead to increasing revenues (and profitability), which would provide the stable, long-term backdrop most corporations would want to see before making large capital investments. The result of a strong increase in capital expenditures would be renewed global economic growth.
Brian Amidei is Coachella Valley's only Barron's Magazine Top 1,000 Advisor in 2013 and 2014!
Brian Amidei, along with Partners Joseph Romano and Brett D'Orlando have also been named *2014, 2015, 2016, 2017 Five Star Wealth Managers!
Awards and recognitions by unaffiliated rating services, companies, and/or publications should not be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Fortem is engaged, or continues to be engaged, to provide investment advisory services; nor should they be construed as a current or past endorsement of Fortem or its representatives by any of its clients. Rankings published by magazines and others are generally based on information prepared and/or submitted by the recognized advisor. Awards may not be indicative of one client?s experience or of the Firm?s future performance. Neither Fortem nor the recognized advisor has paid a fee for inclusion on a list, nor purchased any additional material from the award provider. The criteria for each award is listed below:
The Barron's award is is based on the recognized adviser's assets under management, contribution to the firm's revenues and profits, and quality of practice. Investment performance is not an explicit criteria. Additional information about this award is available at http://online.barrons.com/report/top-financial-advisors.
Five Star Professional Disclosure:
The Five Star Wealth Manager award is based on 10 eligibility and evaluation criteria: 1) Credentialed as an investment advisory representative (IAR) or a registered investment advisor; 2) Actively employed as a credentialed professional in the financial services industry for a minimum of five years; 3) Favorable regulatory and complaint history review; 4) Fulfilled their firm review based on internal firm standards; 5) Accepting new clients; 6) One-year client retention rate; 7) Five-year client retention rate; 8) Non-institutionalized discretionary and/or non-discretionary client assets administered; 9) Number of client households served; and 10) Educational and professional designations. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or the magazine. The award methodology does not evaluate the quality of services provided. Additional information about this award is available at: fivestarprofessional.com/2016FiveStarWealthManagerMethodology.pdf
Fortem Financial 2016. All rights reserved.
Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.
Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. The opinions expressed are solely those of the author, and do not represent those of Fortem Financial, LLC or any of its affiliates. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful. Forward looking statements are based on current expectations and assumptions, the economy, and future conditions. As such, forward-looking statements are subject to inherent uncertainty, risks, and changes in circumstance that are difficult to predict. Actual results may differ materially from the anticipated outcomes. Carefully consider investment objectives, risk factors and charges and expenses before investing. Fortem Financial is a registered investment adviser with the SEC. Advisory services are offered through Fortem Financial.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.