Unlike the December FOMC meeting, wednesday’s meeting was not as highly anticipated. The odds for another interest rate increase, a little over a month after the first rate hike in 9 years, were low. However, market participants were eager to see if any of the words in the FOMC’s official release had changed in order to gauge the timing of their future changes in policy. Also, if Chair Yellen was going to provide some insight into the committee’s thought process on the past meeting’s decision, considering the extreme volatility in the markets since. Interestingly, the FOMC stated that while labor markets have continued to improve, “economic growth slowed late last year”. While labor markets continue to improve slowly, one primary reason for justifying a rate increase during the last meeting was the economic improvement that was evident up to that point. Granted, the Q4 GDP (Gross Domestic Product) figures were not released at that point, but some very reliable estimates were available indicating a significant slowdown in the domestic economy.The release reiterated last meeting’s points regarding household spending and business investment improvement. It also repeated the fact that inflation remains below its 2% target, again due to the weakness in energy prices. However, the release stated “the committee is closely monitoring global economic and financial developments” in order to determine the implications for the job market, inflation and the “risks to the outlook”. The FOMC is once again concerned about weakness in the global economy and its effect on the domestic economy. While it remains their mandate to focus on domestic policy, specifically jobs and inflation, it is concerning to realize the importance they are placing on these developments. In our soon to be released 2015 Market Commentary, I will delve further into the global implications of central bank monetary policy.

In response to the FOMC’s comments, the markets sold off, closing lower by the close. As illustrated in the chart below, various markets have exhibited extreme volatility and weakness post the December FOMC rate increase. While Gold and 30 Year US Treasury Bonds have positive performance since the meeting, the stock market has experienced the worst start to a new year and oil is performing even worse. Maybe the markets are expressing the concerns of the FOMC regarding weaker global growth. Time will tell whether the FOMC will continue on their gradual path to normalization or whether a weakening global landscape will force the committee to stop and reverse course.

At DeCesare Retirement Specialists we prioritize safety of capital above growth opportunity during volatile times. We continue to employ counter risk measures alongside a prudent growth strategy in order to protect capital in what continues to present as a challenging economic and investment environment.

Should you have any questions and/or concerns about your accounts with us or outside of our management, please call me at 856.235.3830 or email me at Steve@DeCesareRetirement.com.