As expected, the Fed did not raise interest rates today. In fact, via the Fed statement and the subsequent press conference by Janet Yellen one would conclude that the path to higher interest rates has once again been altered. Lower for longer would seem to be the theme of the day. Because of “international uncertainties” including the upcoming Brexit vote, and because of a weakening domestic labor market, the likelihood of the Fed moving rates higher anytime soon seems to have been dashed. The simple fact is that all the accommodation that central banks around the world have supplied has had very little, if any effect at all, on economies around the world, and now these same central banks are caught between a rock and a hard place. If all this stimulation hasn’t worked, now what?
As for today’s market response, well there really wasn’t much of one. Stocks were up a little before the Fed statement and stock ended up a little lower after the Fed statement. Bonds didn’t change a lot either. For the day, the Dow Jones Industrial Average was down 34 points to close at 17,640. The S&P 500 was down 3 points to finish the day at 2071. Gold was up $7 to trade at $1,296 per ounce, while oil was down $.80 to trade at $47.69 per barrel WTI.
For investors/savers it is difficult to look at today’s interest rate environment and think that it will be any different six to twelve months from now. The conditions that have caused interest rates to be so low have seemed to worsen once again, and given the level of rates around the globe, our 10 year Note with a yield of 1.59% seems like a bargain. Again, what does this mean for retirees and those hoping to derive a steady stream of income from savings? Rates have been zero for almost seven years. What if they are zero for another seven years?
Have a nice evening everyone.