As it is my job to understand what is driving financial markets and try to put a short-term perspective to price swings and buying and selling opportunities and how they might have implications for longer-term portfolio strategy, I sat down to read the minutes from the latest Federal Open Market Committee (FOMC) / Fed meeting.
It is here, if you want to have a go....
The financial markets are no doubt focused on whether their might be a June interest rate increase (they next meet on June 14-15). The fact that it was "still on the table" was a surprise, apparently. Personally, I think that it is always on the table, because they do want a "normalization" of rates and they do have a rather optimistic outlook, in general, about future economic growth.
When the proverbial "punch bowl" of monetary accommodation is pulled away (and we had just a glimpse of it yesterday), volatility will jump. Too many investors and traders have been lulled into complacency by the global central bank mantra that volatility is the enemy.
Volatility is inevitable, if interest rates are going to be normalized, just like it was when everybody "flipped out" in the summer of 2013 in advance of the potential secession of QE3 (remember the "taper tamtrum"?).
But it provided a great buying opportunity, especially for bonds. This time, it will be stocks.
So we think it is wise to have more cash in your portfolio to take advantage of the upcoming buying opportunity (and to avoid the inevitable melt-down of now over-priced equity markets).
You can, if you wish, just ride it out, or if you want a more active (and caring) approach (real portfolio management), let me know (it might just cost you less in fees, but may just help portfolio performance too).
Your feedback is always greatly appreciated, but there are some Q and A that I can no longer post on the blog because it apparently upsets some people (who don't like controversy), however, keep it coming, because I can and will respond privately:
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Scott Tomenson,CIM Managing Partner, Chief Investment Strategist