Bumpy Roads

Have you ever been on a long drive down a bumpy road?

Photo: Valley Isle Excursions. Source: Flikr. CC-BY-2.0

As a newly-minted driver some umpteen years ago, I never understood why my parents always told me to slow down while driving on roads that got a little rough. It felt fine to me. To be honest, the chop and rattle could be a little exhilarating, a break from the monotony of long, straight, flat highways in the Midwest.

But now that I’m a little older and my joints and back get sore a little more easily and my wallet is a lot lighter from paying all thost repair bills, I’m the one telling my kids to take it easy, don’t be in such a rush, we’re not in an action movie. Things break when they get banged up, and the destination will still be there whether we get there in an hour or an hour and a half. Just. Slow. Down.

It seems that’s what the market is telling the Fed right now. What’s the hurry? We know that Fed wants to get rates back to “normal.” But monetary policy acts with long and variable lags. The Fed raised rates four times this year and Chairman Powell recently said they expect to raise rates twice more next year. While he indicated some that they want to listen to the data going forward, the markets have been noting, commenting, shouting from the back seat, “Listen to us: slow down!”

One of the things new drivers don’t understand is how powerful a car really is. When you drive, you’re directing a two-ton projectile at highways speed. New Fed Chairs also tend to underestimate their power. They were academics, or investors, or analysts in in their previous life, not superheroes with superpowers. But the Chairmanship has transformed them. They’re setting the price of money in a $20 trillion economy. That’s a of economic muscle.

Muscle Car. Photo: Karl Freese. Source: Wikimedia

As a young driver, after I hit a few potholes and rattled my passengers’ bones, I slowed down. Let’s hope the Fed listens to its passengers.

Douglas R. Tengdin, CFA

Charter Trust Company

“The Best Trust Company in New England”

By |2018-12-27T07:16:42-04:00December 27th, 2018|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

Leave A Comment