Tuesday, February 11, 2014

It's The Economy Stupid: WWJD

WWJD – What Will Janet Do


The Federal Reserve has released the prepared remarks of Janet Yellen's first testimony before Congress as chairman of the Federal Reserve.


" Too many Americans remain unemployed, inflation remains below our longer-run objective, and the work of making the financial system more robust has not yet been completed"


"...the recovery in the labor market is far from complete. The unemployment rate is still well above levels that Federal Open Market Committee (FOMC) participants estimate is consistent with maximum sustainable employment. Those out of a job for more than six months continue to make up an unusually large fraction of the unemployed, and the number of people who are working part time but would prefer a full-time job remains very high. These observations underscore the importance of considering more than the unemployment rate when evaluating the condition of the U.S. labor market."


"We have been watching closely the recent volatility in global financial markets. Our sense is that at this stage these developments do not pose a substantial risk to the U.S. economic outlook."


Judging by the market's reaction — Treasuries are taking a hit and the dollar is strengthening — investors were looking for Yellen to find a way to communicate a more "dovish" tone to market participants.

Instead, she reiterated that the Fed planned to continue winding down its quantitative easing program, and she shrugged off the effects of recent turmoil in global markets.

So clearly some investors were thinking that the Fed would suddenly change directions in its tapering of quantitative easing.  What were they thinking?  The Fed almost never changes course suddenly. 


There is a stronger probability that the Jamaican’s will win a gold in the bobsled at the winter Olympics.



Life is good!  The alternative?  Not so much.


John Broussard

Assistant State Treasurer

Chief Investment Officer

State of Louisiana

Department of the Treasury




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