Now that the Federal Reserve has raised interest rates, analysts anticipate further increases. Christopher Condon covers the story for Bloomberg. Knowing what you can and can’t control about the stock market can help you get better results from it. That’s according to William Smead, who offers advice for investors on how to improve portfolio performance. Those who have been frustrated by the volatility of this year’s markets may not find 2016 any easier to navigate. Liz Ann Sonders of Charles Schwab says to expect uncertainty at the start of the coming year. Despite a stated preference for good news, people often choose to read bad news headlines first. Jim Parker of Dimensional Fund Advisors warns investors of the dangers of acting too quickly when the news is alarming.
Fed Ends Zero-Rate Era; Signals 4 Quarter-Point 2016 Increases– The Federal Reserve raised interest rates for the first time in almost a decade in a widely telegraphed move while signaling that the pace of subsequent increases will be “gradual” and in line with previous projections. The Federal Open Market Committee unanimously voted to set the new target range for the federal funds rate at 0.25 percent to 0.5 percent, up from zero to 0.25 percent. Policy makers separately forecast an appropriate rate of 1.375 percent at the end of 2016, the same as September, implying four quarter-point increases in the target range next year, based on the median number from 17 officials. Read more…
Stock Market Control– William Smead of Smead Capital Management discusses what you can and can’t control in the U.S. stock market. After all, the reason that stocks outperform other liquid asset classes over long stretches of time is the uncertainty and variability of returns. Here is a short list of things which can’t be controlled in the U.S. stock market. Read more…
What Was, What Is, And What May Be– It’s been a “running to stand still” market this year, with US stocks breaking all-time records for the number of times they crossed above and below the flat performance line for the year. The start of 2016 looks to continue that grinding phase. Many global economies—including the United States—have become bifurcated, with manufacturing and commodities still struggling, but consumer and services sectors looking healthy. Investors should stick with their long-term allocations and not look to be either overly aggressive or defensive at this stage, given policy-related uncertainty. Liz Ann Sonders and her team at Schwab review the current market and what to expect in early 2016. Read more…
Second-Hand News– Why don’t the media run more good news? One view is that bad news sells. If people preferred good news, the media would supply it. For investors though, the danger can come when the emotions generated by bad news prompt them to make changes to their portfolios, unaware that the news is likely already built into market prices. Jim Parker of DFA explains in this article. Read more…
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John R. Day, Bill Ennis, Stephanie Davidson and Matt Heller