More Fed Stimulus, Plus Relative Valuations

Posted on September 14, 2012 | Investor Update

I had originally written solely about stock valuations, but I thought I should say something about today’s announcement from the Federal Reserve.

As you may have heard by now, the Federal Open Market Committee (FOMC) announced more monetary stimulus. The reason given is that the FOMC is “concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions.” This is why the FOMC is increasing the amount of mortgage-backed securities it is purchasing, keeping their target for the federal funds rate at 0%–1/4% until mid-2015 (instead of late 2014 as they said last month) and is prepared to provide even more stimulus if necessary.

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