This morning Plosser said, "I believe the Fed will need to withdraw the extraordinary amount of liquidity it has provided to the economy and begin to raise interest rates as the economy continues to improve and financial markets return to more normal operation."
Last month we reported the similarly steely words from Federal Reserve Chairman Bernanke: “It will be very important to remove monetary accommodations at the right time.”
Golly fellas, that’s just swell.
Even the most hawkish Plosser is saying that definitely someday, sometime, somehow, we’re going to have to tighten.
I don’t quite understand your point. Of course Plosser is saying this, he’s the hawk!
All of this supports our conclusion that the markets and economy should remain generally stable, if not positive, as long as the government-money punchbowl remains. Keep in mind that there will be down-legs, but conditions remain so fragile that the best they can do is talk about some point in the future when they will need to reverse course. The eventual and evitable tightening in policy, in our opinion, will not bode well for share prices when that time comes.
Our prescription is to follow our discipline and remain invested. We cannot predict with any degree of precision when the government might see fit to reverse course. Faced with this uncertain backdrop, our work continues to favor multi-national blue-chip companies that are largely trading at discounts to the index averages, provide a good deal of international exposure, along with somewhat of an inflation hedge, and offer strong downside protection should another crisis arise. Our “Top 10 for ‘10” list is available both on the CNBC blog site and by emailing us at firstname.lastname@example.org
*This year’s Economic Summit 2010 at the University of Delaware will be January 20th at 8:30 am. The speakers are Knight Kiplinger of Kiplinger Publishing, the Honorable Nancy Wentzler, Chief Economist and Deputy Comptroller of the Currency, and me. Nancy will focus on the future of US Banking, Knight on Real Estate, and I will focus on the stock market. All of us will present our Economic forecasts. It’s free. Please come. Again email@example.com details.
Michael K. Farr is President and majority owner of investment management firm Farr, Miller & Washington, LLC in Washington, D.C. Mr. Farr is a Contributor for CNBC television, and he is quoted regularly in the Wall Street Journal, Businessweek, USA Today, and many other publications. He has been in the investment business for over twenty years.