A few days ago, we briefly talked about how the last meeting for Janet Yellen as Fed chairman that took place in January would tell us a lot about where our economy was headed. With the minutes being released this week, the question now is:
What Does This Mean For The Economy?
With the increased economic growth and the uptick in inflation, the Federal Reserve officials see this as enough justification to raise interest rates gradually. While they did not raise them on their Jan 30-31 meeting, it is expected that they will moving forward the rest of this year. We already know this will cause the bond prices to suffer but it seems the market is unsure how this will affect the stocks.
No surprise though, this caused the market to react with a lot of volatility.
While Janet Yellen is no longer Fed chairman, it is expected Jerome Powell will continue in her steps to continue with the rate hikes. As the 10-year Treasury note hit a four-year high, the Fed minutes described a 2% goal for inflation from the Fed over the “medium term”.
"Members expected that economic conditions would evolve in a manner that would warrant further gradual increases in the federal funds rate," the minutes said. "They judged that a gradual approach to raising the target range would sustain the economic expansion and balance the risks to the outlook for inflation and unemployment."
What Does This Mean To You?
It means you need to be careful. The market does not seem to know exactly how to react to the continued talks of rising interest rates and a 2% inflation goal. We have still not seen any reason (not that always needs to be one) for stocks to turn downward for any lengthy period. But, with all this uncertainty, we strongly believe you need to protect your positions and protect the gains you have enjoyed the last 9 years.
After all, you protect your house with homeowner’s insurance, you protect your car with auto insurance, you even protect your health with health insurance…why wouldn’t you protect your financial well-being?
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