Last Wednesday, the U. S. Federal Reserve (the “Fed”) decided to continue its bond purchase program. The Fed based its decision to maintain its unconventional support for the markets and the economy on still-modest economic growth, low inflation and unsatisfactorily high unemployment. Stock and bond markets around the world cheered and rallied on the surprise gift from the Fed.
For bond investors, it was a Happy Fed Day. Following the Fed’s announcement on Wednesday, the bond market rose, as the yield on 10-Year Treasury fell 15 bps to 2.69%.
Will the Fed revisit this decision at its December meeting? What will be the next shoe to drop? The ongoing crisis in Syria? A debt showdown in October? Market oscillations continue in anticipation of a Fed move. The S&P 500 fell 0.7 percent on September 20, as Fed Bank of St. Louis President James Bullard speculated that policymakers might decide to reduce their monthly bond purchases at the Fed’s October meeting.
Cutting through the near-term noise is critical to achieving long-term investment objectives. We believe that a disciplined and proven investment process allows us to capture opportunities created by market inefficiencies and enables us to avoid the short-term chatter in the market. While it is important to pay attention to market moving news, it is more important to keep sight of what is most important to us – our long-term goals.
Data source: Bloomberg, Wall Street Journal