One month they say they’re going to taper the current quantitative easing program…and a couple of months later they change their minds and decide to keep going. In the interim, interest rates on mortgages jumped, which put a slight damper on the housing market, and the markets fluctuated a little as they adjusted and readjusted to the news.
This is a classic case of the markets reacting to “what we say, not what we do.” These days, anything the Fed says tends to result in knee-jerk responses that, while often short lived, reverberate throughout the economy.
While the Federal Open Market Committee (FOMC) acknowledged improvement in the labor market, consumer and business spending, as a whole, did not view the data as necessarily sustainable.
[CLICK HERE to read the article, “FOMC Meeting Statement,” at The Federal Reserve, Sept. 18, 2013.]
[CLICK HERE to read the article, “The Fed’s About Face,” at Guggenheim, Sept. 19, 2013.]
[CLICK HERE to read the article, “What Rising Interest Rates Mean for Home Prices,” at The Wall Street Journal, Sept. 20, 2013.]
While the FOMC may act as one cohesive unit, it is actually comprised of a number of different bank executives with various dispositions and opinions on how to drive monetary policy in this country. In fact, one day after the Fed’s September announcement that it would stay the course, some members voiced their dissention with the latest decision. James Bullard, president of the St. Louis branch, admitted that the vote for the status quo was “borderline” and that he believed a small taper is possible in October.
[CLICK HERE to read the article, “Fed’s Bullard: Small Taper Possible in October,” at The Wall Street Journal, Sept. 20, 2013.]
As you would expect in a democratic society, the Fed is comprised of widely varying points of view, from those who vociferously oppose to those who aggressively support easy money policy. These viewpoints, along with continued tracking of hard data cited by the leading economic indicators, are how we as a country make decisions that impact our financial future.
[CLICK HERE to read the article, “Wanted: A Boring Leader for the Fed,” at The New York Times, Aug. 20, 2013.]
Apparently, this same principal of financial management works well in the household. According to a recent study by the University of Missouri, spouses who plan together and share their vision of retirement tend to be more financially stable and have greater confidence during their golden years. Money matters are not the only thing at stake here; the changes in lifestyle and relationship that occur post-retirement can have a profound effect on a couple. It’s important to ask yourself the same questions you might have when you first got married, or when you decided to have children: How will retirement impact your relationship? As one of the study’s authors pointed out, retirement doesn’t always look like it’s portrayed in TV commercials.
[CLICK HERE to read the article, “Spouses Who Plan Together Are Best Prepared to Retire: Behavioral Study,” at ThinkAdvisor, Sept. 6, 2013.]
Not too unlike those crazy kids at the Fed, it’s important for each member of a couple to honestly voice their opinions about their future and the way it should be managed – both from a lifestyle and a financial perspective. Once you have all of the visions, dreams, and hard data aired and explored, only then can you reach a decision that represents your best interests going forward.
If we can help you explore and reconcile the differences you and your spouse have regarding your retirement, please contact us.
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This information is not intended to provide any investment advice or provide the basis for any financial decisions. Be sure to speak with qualified professionals before making any decisions about your personal situation.