US Federal Reserve, Hawks Vs Doves
$DIA, $SPY, $QQQ, $VXX
Friday we had 4 FOMC members speaking and participating on panels (jawboning). Within the US Fed there are colliding forces about US monetary policy. Not a situation that is market/investor healthy.
The latest FOMC votes reveal that 3 members of the FOMC dissented in favor of a rate hike now while 3 other voters did not want to rates at all this year, a standoff.
In the past the FOMC effectively closed 1 or 2 dissenters in order to actually show a vote that was along what the majority wanted and by doing so maintained a look of unity, that is a questionable practice.
The Federal Reserve is deeply divided now reflecting too much uncertainty.
Today’s Federal Reserve speakers, none are known for being Doves are, as follows:
- Atlanta’s Fed President Dennis Lockhart who is not an FOMC voter and considered as moderately Hawkish,
- Cleveland’s Fed President Loretta Mester who is a FOMC voter and considered as moderately Hawkish,
- Philadelphia’s Fed President Patrick Harker FOMC (prepared remarks) who is a FOMC voter and considered as a Centrist, and
- Dallas Fed President Robert Kaplan who is also a FOMC voter and considered as moderately Hawkish.
This week’s FOMC decision, 1 of the most widely anticipated decisions, signaled, within the careful wording of the Fed statement, that a December rate increase is in the cards, maybe.
Investors should keep an eye on this situation as this goes beyond just 3 FOMC members voting for a hike now in September when at the same time there are 3 other FOMC members which did not expect a rate increase at all this year and maybe next too.
This does display the present nature of the US Fed and it may be wrong to characterize this as a Hawk Vs. Dove division. It is more, it is the consequence of opinions of all multiple directions, which leaves all categories of investors with massive uncertainties that are not helpful for making sound investments decisions.
The Fed policy is no longer a binary issue, because there are multiple channels by which central banks can seek to influence outcomes, namely; monetary, quantitative and regularity.
Barring significant disruption to the economy and with what we know, or think we know, the Fed could raise interest rates in December and could signal for next year a cautious approach to rate increases.
In that case, it is not overstatement to say that long-term investors are obliged by the Fed, to some extent flying blind in here.
Friday, the US major stock market indexes finished at: DJIA -130.74 at 18261.72, NAS Comp -33.78 at 5305.74, S&P 500 -12.47 at 2164.71
Volume: Trade on the NYSE was light to moderate at 803-M/shares.
- Russell 2000: +10.6% YTD
- NAS Comp: +6.0% YTD
- S&P 500: +5.9% YTD
- DJIA: +4.8% YTD
|HeffX-LTN Analysis for DIA:||Overall||Short||Intermediate||Long|
|Neutral (-0.22)||Neutral (-0.23)||Bearish (-0.35)||Neutral (-0.08)|
|HeffX-LTN Analysis for SPY:||Overall||Short||Intermediate||Long|
|Neutral (0.16)||Neutral (0.22)||Neutral (0.12)||Neutral (0.12)|
|HeffX-LTN Analysis for QQQ:||Overall||Short||Intermediate||Long|
|Bullish (0.29)||Bullish (0.27)||Bullish (0.35)||Bullish (0.25)|
|HeffX-LTN Analysis for VXX:||Overall||Short||Intermediate||Long|
|Bearish (-0.32)||Neutral (0.12)||Very Bearish (-0.50)||Very Bearish (-0.58)|
Have a terrific weekend.