Mixed Messages - What is Right?

Mixed Messages - What is Right?

March 27, 2018

nullMichelle Holmes
Trust Investment Officer

The Federal Reserve raised short-term interest rates a quarter of a percent to a range of 1.5% to 1.75% in the first meeting under new Federal Open Market Committee (FOMC) Chairman Jerome Powell. This was widely expected by market participants. The bigger news story was the outlook of the FOMC committee members going forward. The FOMC committee members increased their outlook for interest rates over the December meeting.

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Source: FTN Financial

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Source: WSJ Daily Shot

After each meeting, analysts digest the news along with the comments and committee member forecasts. The following headlines came out after the latest FOMC meeting.

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Source: Bloomberg News

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Source: WSJ Daily Shot

The first headline suggests the Federal Reserve’s FOMC committee is more hawkish and may raise interest rates faster. The second headline views the same meeting information as dovish, meaning the pace of rate hikes in the future could be slower than expected.

How can people see one news item in two very different lights? The short answer, it depends on your perspective and/or bias.

The first article is looking at the FOMC future rate predictions versus the outlook after the December meeting which are higher than they were in December. The second article is looking at the same numbers versus expectations. Market expectations changed after Congress passed the tax overhaul late last year. As a result, market participants expected the FOMC to increase their long-term rate forecasts, but some thought the FOMC would increase the interest rate outlook in 2018 as well. Although several FOMC members increased their outlooks for 2018, the average did change the outlook of three interest rate hikes this year.

When selecting and implementing a strategy for your investments, how do you determine which commentator to believe? For over 135 years the experienced team at Security National Bank has helped people make sense of complex and sometimes conflicting financial information. If you want to know how this or other news items may affect your portfolio, contactSecurity National Bank Wealth Management team today. 

About the Author

Michelle Holmes, CFA

Michelle Holmes is an Assistant Vice President in Investments with Security National Bank's Wealth Management Division. A Chartered Financial Analyst® charterholder, Michelle has two decades of investment experience. She graduated from Morningside College with a Bachelor of Science in accounting, business administration and economics.