May 30, 2023
Posted on May 30, 2023
Planning and Guidance, Tailored To Your Life and Goals
Posted on December 23, 2014
“…Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committee’s 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.”The Fed’s decision was enough to calm markets, many of which showed attractive gains by week’s end.
“The quintile of countries with the highest growth rate over the previous five years produced average returns over the following year of 6 percent; those in the slowest-growing quintile produced returns of 12 percent… Why might this be? One likely explanation is that growth countries are like growth stocks; their potential is recognized and the price of their equities is bid up to stratospheric levels. The second is that a stock market does not precisely represent a country’s economy – it excludes unquoted companies and includes the foreign subsidiaries of domestic businesses. The third factor may be that growth is siphoned off by insiders – executives and the like – at the expense of shareholders.”Here is another interesting economic tidbit. While past economic growth does not predict future equity market performance, changes in stock prices do correlate to future economic growth. That’s because expectations play an important role in markets. The expectation of poor future economic performance may cause a country’s share values to fall, and vice versa. A research report from Schroders said, “If expectations are key, a poor economic outlook will already be priced in, and investors’ returns will depend instead upon whether market expectations are overly optimistic or pessimistic with regards to future GDP growth.” ]]>