The Federal Open Market Committee (FOMC) broke from its much-anticipated meeting Wednesday, keeping Fed policy in place with the continuation of $85 billion in monthly bond purchases, while at the same time giving mild praise to the recent improvement in the overall economy. The news is helping bonds rally off of the lows, and it’s keeping buyers of equities active as well. The policy statement was pretty much what everyone needed to hear: “unchanged for now.”
The Fed’s dual mandate of jobs, jobs, jobs and low interest rates is safe for now, and should continue to make for a market-friendly environment for high-yield income investors. However, what keeps coming out in the Fed notes is its concern about disinflation stifling wage growth. It’s one thing to create jobs, but if they are low-paying and don’t provide spending power, it becomes almost a zero-sum game for the Fed’s end-game strategy…or exit strategy to be more precise.
In terms of investable opportunities in the wake of the latest Fed announcement, I am seeing that financial stocks are getting good rotation, and I’m looking to add exposure to that space.
Here’s the bottom line: What the market heard from the Fed is that they expect U.S. economic growth to pick up in the second half of the year without the risk of core inflation taking off any time soon. Investors are latching on to the lingo. It’s not wildly bullish, but we’re moving in the right direction.
Bryan Perry is the editor of Cash Machine, a newsletter focused on high-yield income investing with a the goal of maintaining a blended total yield of 10% across two portfolios. Bryan is also the editor of Extreme Income which uses the power of historically cheap money to create a leveraged “baby hedge fund” strategy that paves the way to massive profits and 4x greater income.
Stay tuned! Bryan is currently working hard on a brand new strategy that amplifies your income potential by utilizing a conservative options strategy based on stocks you may already own.