The quote is from Oscar Wilde from The importance of Being Earnest but also defines the tension of what the Fed will do and when will they do it.
Long term lead indicators are stretching their tentacles into Mid Summer 2015 and foresee neither business cycle peak nor recession but we will be in the zone where the Fed may decide to begin to normalize short term interest rates. Of course they could do absolutely nothing next Summer but we do see from the Fed meeting minutes that rate hike hawks are growing in number. In the meantime its safe to assume that a benign, low to zero interest rate policy will remain in effect which is positive for equities.
ECB President Mario Draghi affirms that European central banks will maintain very low interest rates for very long time and may introduce their own version of Quantitative Easing. So, we will have two of the largest central banks at 0% interest rates for at least the next 6 months, and probably more.
With this backdrop we remain fully invested in equities having deployed the last of our remaining cash during the small pullback earlier this month. The path of least resistance for equities remains higher.
We remain in the slow season for equities but in just over a month’s time this will be ending and we’ll be in the market’s happy zone from October thru March where the majority of the year’s gains can be made.
Brad Pappas