Fed Chair Janet Yellen’s testimony February 27 on Capitol Hill provided
a signal that the market wanted to hear: Policymakers are looking
closely at the data to determine if bad weather is truly to blame for
the recent weak reports on unemployment and other economic indicators.
If it’s not the weather, she said they’re open to the idea of
reconsidering the taper.
Even as the Federal Reserve approved the second round of its monetary
tapering last month, it reassured jittery investors that short-term
interest rates would remain at near-zero levels well into the future.
But the minutes from that January meeting, released to the public this
week, tell a different story.
As of this week, more than 70% of the companies in the Standard & Poor’s
500 have reported earnings for the latest quarter, revealing a few
trends that create some concern about U.S. equities in 2014. Revenue
growth is well short of earnings growth and has shown no signs yet of
Recently I was asked to discuss the state of the market so far in 2014
and to offer some thoughts on where we see opportunity. It is certainly
a challenging market with complications provided by the Fed’s necessary
but disruptive move to taper its monetary stimulus and the extremely
cold weather across the United States. Despite this year’s rocky start,
investors are still overwhelmingly bullish even as fundamental
valuations are getting stretched ever tighter.
In voting unanimously to continue reining in its monetary stimulus, the
Federal Reserve this week made it clear that its focus is squarely on
the U.S. economy, even if its decisions add to the current pressure
being felt in emerging markets.