What's Next For The Fed?
With "Operation Twist" set to expire in June, what is next in store for the Fed? The Fed has taken the most aggressive stance on policy easing and economic stimulus ever on record over the last three and a half years. With the Fed Funds Rate still at 0 to 0.25% and numerous easing programs under their belt, the Fed balance sheet has grown to nearly $3 trillion dollars. A more typical number is in the $800 billion range. This money is out there in our economy right now...but not changing hands and creating opportunity as quickly as the Fed would like. So, when does all of this craziness stop? Likely, no time soon. If you read the Fed minutes and also politically, there will be no tightening until unemployement improves substantially. Yes, the unemployment rate is down to 8.2% and initial jobless claims have stayed consistently below 400,000...but until we see a large improvement we will be in this low rate environment for the foreseeable future.
Be smart about the income producing securities you are purchasing, don't take undue risk and be prepared to ride this out.