Here We Go with the FOMC

Might as well simply figure that the business news will be dominated by speculation over what the Federal Open Market Committee will announce tomorrow midday.

We don’t need to speculate as the Fed Chair has backed himself into the corner with his congressional testimony and will have to deliver a 1/4% cut to interest rates. To do otherwise would tank the stock market, God forbid, and who wants to be the one to stop that party.

As we have mentioned, and we admit “talking our book”, with an economy that is growing around 2% and employment which is very strong there is no reason to lower rates. Sure the global economy is kind of weak–but no one can save Europe, demographically they are becoming Japan and to push on a string is a waste of our effort.

We are somewhat resigned to the cycle of issuers redeeming issues and sticking us with a lower coupon–but that is ok–companies need to do what they need to do and we need to find a way to earn a little reasonable return. That is what this game is all about.

4 thoughts on “Here We Go with the FOMC”

  1. Actually, I’m using this stage of the cycle to sell high yield issues I never should have purchased in the first place. Issues like the Gaslog 8.625% “A” and the Teekay 8.5% “B”. I feel fortunate to get out of them whole.

    I still own the Teekay Offshore 8.875% “E” at a big loss. Anyone have any opinion as to what Brookfield will do now that they own this company? Thanks in advance for any opinions.

    1. Randy–I think that is a wise move. Of course I don’t buy shippers so I don’t have them to sell–just no trust in the managements of most those companies.

  2. With so much attention on an event with a seemingly forgone conclusion, there is probably a big danger that markets will overreact to a stray adjective or adverb in the announcement or press conference. After this meeting, the market wants to anticipate another cut in September. I’m wondering if the Fed will take a “wait and see” approach that will disappoint equity markets.

    1. Yes–certainly the press conference is a risk–always is the way the business press parses every syllable. I would be surprised with a Sept cut–of course we have to see where the data takes us and then see how Powell can handle the political pressure.

Leave a Reply

Your email address will not be published. Required fields are marked *