The Federal Open Market Committee completed their meeting this morning, and the conclusion was much the same as we’ve come to expect: continued stimulus in the form of $85 billion in bond purchases a month with the same targets (6.5% unemployment assuming no higher than 2.0% inflation). However, their outlook seemed slightly more optimistic on the economy, and also contained an acknowledgement of diminished downside risks.
The markets have been on pins and needles waiting for the news and we’ll see their reaction tomorrow. But when it’s all said and done does it really matter? We all have a pretty good sense that our economy will continue to improve, we all want the economy to improve. We all also likely think that an improving economy will be better for corporate profits and thus the shares of those self-same companies. The corollary to that will be that sooner or later inflation will tick up and interest rates will rise off their historical lows. Meaning that owning Treasury bonds with a yield of 2ish percent is likely not a good long term investment strategy at this time.
No matter how the press plays this today and tomorrow our advice is not read too much into this. It doesn’t really make much difference at all in the construction of a long term investment strategy and the conclusions drawn from this widely watched measure shouldn’t affect the way you manage your money or your outlook for financial assets over the next couple of years. This is all baked in the cake already and while speculators will try to make hay by predicting the short term future investors will already have their plans in place for the long term.