"There are also more long lasting or persistent factors that may be at work that are holding down the longer-run level of neutral rates" said Fed Chair Janet Yellen in her post meeting press-conference.
And there is the heightened risk of a UK vote to leave the European Union which could have potentially devastating economic circumstances not only for the UK but for all of Europe and the global economy. This will take place next Friday, June 23.
Federal Reserve governors have also suggested that there is a lower probability of 2 interest rate increases for 2016 (there are now 6 of 17 that expect only 1 rate increase in 2016, up from 2 of 17 in March):
Volatility, as we have always held as a key factor in global monetary policy, is the enemy of central bankers and the likelihood of higher interest rates in the current environment is just not prudent from their perspective.
If the UK votes to leave the EU (and the polls are currently favouring that situation), there could be a very significant repricing of assets.
That could prove to be a rather difficult time for a fully-invested portfolio.
The US Federal Reserve very much wants to find a reason to "normalize" interest rates, but they cannot find the justification because the risks are too high.
The message is clear here: risk assets are vulnerable.
Cash (and cash equivalent assets) and safe government bonds (of a longer duration) are prudent and defensive assets to be over-weight of in a portfolio.
Equally, risk assets (like equities) are good to be under-weight of.
You can always get back in to a market if volatility subsides. It may be a lot more difficult to get out if it doesn't.
Thanks for all the feedback, please keep it coming....
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist