Early next year, Janet Yellen will replace the brilliant Ben Bernanke, our favorite Fed Chairman. This will happen when his term ends in early 2014. The US economy remains in good and capable hands.
This is one of those infrequent times when the economic way forward can be clearly seen. Stars and tea leaves must be in alignment. For an extended period the equity markets are going higher.
Janet Yellen told me
At the Senate confirmation hearing into Yellen’s appointment by President Barack Obama she stated her vision of future Fed policy. Anyone listening would come to the same conclusion that I did. The well established Fed policies will continue. That good news means that markets will continue going up.
Economist Janet Yellen will not win any public speaking awards but her intelligence and experience certainly shine through the political noise. As an architect of the Fed’s Quantitative Easing program, it was no surprise when she indicated her full support for the current Fed direction and methods.
Big and significant news!
Janet Yellen said that under her direction, the extended period of easing will continue even after the employment rate reaches desired target levels! That means she will continue the same central bank policy for an extended period after reaching a key economic goal.
Put into plain English that means for the foreseeable future the massive US economic stimulus will continue for possibly several more years yet. The stimulating effect of that seemingly endless deluge of money keeps the risk of deflation in check.
Without any sign of widespread inflation in America there is only one way for the market will go – higher!
In fact the massive $85 billion monthly financial injection extends the upside for at least 5 more years! That is the absolute minimum period needed to unwind the purchases made each month.
So each month we know the program will be around for at least another five years! That is not saying no market correction or bumps in the road during that time. They will happen.
However, under the economic pressure of such massive stimulus, any corrections or short downturns will be limited. They will be buying opportunities. But when they occur, such opportunities will quickly pass and we will resume going higher yet.
The point being that the overall uptrend continues and will do so for some considerable time. Equities will continue to climb for much longer.
What to do
Bonds are in for an extended tough period. Stores of value such as gold should be avoided. Gold may see the downside of $1,000 and commodities could struggle. Invest in dividend producers or rising equities to grow your portfolio. Financials and income producers will continue to do well.
Dividend plays continue to look good and companies driving revenue are doing fine. Go there to ride your portfolio to higher values.
Can this go forever?
Absolutely not. The piper will have to be paid but that is years away yet.
How long do you think the uptrending bull market will continue? Make a comment, ask a question, we can talk about it.
These discussions are intended to help you better understand markets and investing. The White Top Views email list will not be shared or sold.
Have a great day!
White Top Investor
See all blog posts at: www.WhiteTopInvestor.com
Let’s connect, follow me:
Want site or blog content? Syndicate White Top View, contact info@WhiteTopInvestor.com. I am not a financial or investment advisor; opinions are for informational and educational purposes only and are not intended as investment advice.