I
f you watch the news, you can almost go crazy watching the daily market fluctuations. One day it appears that the economy is strong, and the news begins to feature pundits who say that the Fed will be forced to raise interest rates. They claim that the Fed will have to raise rates quite a bit to reach a neutral level. The stock market proceeds to take a nose dive.
However, the next day, the economic numbers go the opposite direction, signaling the economy is not quite as strong as expected. A different set of pundits appear on television, but these claim that the Fed will be lowering rates. They mention the deflating housing bubble among other things. The market goes up.
The next day something different happens. You could really get stressed focusing on all these fluctuations. My recommendation is don't pay attention to them. They are not news, just noise.
Unless you are a very nimble and astute trader, take a longer term view. The economy is in good condition and seems to be going along at a moderate pace. There is plenty of liquidity for growth. Most importantly, the Fed does not see any reason to change its current path.
I have always said that it is more important to watch what the Fed does rather than what it says. Right now the Fed isn't doing anything and is trying to avoid doing anything if it can help it. There are many "what ifs" in Chairman Bernanke's public statements but no concrete decisions to take action. Until that happens, enjoy the soft landing. It has been quite profitable thus far and does not need to be that painful if you can avoid paying attention to the noise!
Doug Roberts is the Founder and Chief Investment Strategist for FollowtheFed.com, an independent research firm focusing on investment strategies using the Federal Reserve's impact on the stock prices. He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.
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