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Overwhelming Number of Individual Investors Think Federal Reserve Has Too Much Power

Last week’s AAII special question asked how much power individual investors feel the Federal Reserve has over boosting the U.S. economy and the stock market. In all, 439 members responded.

Among those that addressed whether the Federal Reserve has too much or too little power (75 in all), an overwhelming percentage–97.3%–feel that the Fed has too much power.

For those that answered the question more broadly–the Fed has a lot of power, only some, or a little or none–67.5% (148 of 219) believe that Fed, overall, has very little or no power over the economy and stock market. Another 26.5% think the Fed has a good amount or a lot of influence over the stock market and economy.

Lastly, looking at the respondents who addressed separately the amount of power they think the Fed has over boosting the stock market and economy, most feel that the Fed has more power over driving the stock market than the economy. Specifically, 86.6% think the Fed has some or a lot of influence over the stock market, compared to 76.9% who think the Fed has little or no power over the economy.

Here is a sampling of the responses:

  • “With rates near zero, they are impotent. They overplayed their hand to a ridiculous degree. They should announce a hike schedule and stick to it, something like 10 basis points a month until [rates] reach 2% and then re-evaluate. They should also slowly sell off their bonds, maybe just $50 million a month to start. They must normalize rates if retirees are going to survive and politicians are ever going to see what all this deficit spending really costs.”
  • “A great deal of power. They have printed money for the past 8 years and significantly increased the national debt. When you extract that action from the economy there has been little real growth and the stock market has been artificially inflated. When will we pay the price?”
  • “At this point, maybe not much [power], but they are the only game in town. Congress does nothing.”
  • “[The] Federal Reserve is fighting to stay relevant with an empty toolbox….a carpenter without a hammer if you will. Notice that whenever they give serious signs of raising rates something dramatically changes their “data dependent” view. It’s almost like a wink-wink that tells the forces that be “you better come up with something really negative or we will be forced to raise rates”. Two and a half years of jawboning and one 0.25% hike…and yet every media outlet hangs on and analyzes her [Yellen’s] every word as if she is some sort of soothsayer.”
  • “More power to do harm than to do good. Seriously, can you say, “micromanage,” and with something as complex as the U.S. economy, that’s a recipe for disaster. Maybe not this time … or the next … but eventually.”

And here is this week’s most unique response:

  • “Limited [power]. More like a brake against disaster, but not a push toward growth.”

Want to weigh in? Participate in our weekly member poll, updated every Tuesday, and see the results online at http://www.aaii.com/memberquestion.

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