Will the Fed Have Second Thoughts About Continuing to Pull Back on its Stimulus Program?

If you read our past post: Is Ben Bernanke Responsible For All The Market’s Gains?, you know that we discussed the market gains over the last year being related to the Fed’s efforts at quantitative easing (printing money).

A recent article from Bloomberg discussed our new Federal Reserve Chairman Janet Yellen "pledged to maintain her predecessor’s policies by scaling back stimulus in “measured steps"" provided they see the economy stand strong on it's own.

However, with the recent employment report coming out last week from January, the Federal Reserve could have second thoughts about continuing to pull back on its stimulus program.

The U.S. Economy increased from December's 75,000 jobs up to 113,000 for January. A definite improvement, but well below the 178,000 jobs economists were expecting.  

Yellen went on to say “I am committed to achieving both parts of our dual mandate: helping the economy return to full employment and returning inflation to 2 percent while ensuring that it does not run persistently above or below that level.”

The next time the Fed meets will be in March, after February's employment numbers are released. The focus will be on the results and how Janet Yellen will react. This will have a direct impact on the markets. 

You can't control what the markets do, or when they will do it. And the timing of a market downturn, can have a dramatic impact on your retirement.

If  you are retired, or retiring in the near future, then one of the most important things you need to do is protect your nest egg against downside market risk. Now is not the time for you to get greedy, it’s the time to be defensive.

If you are still working and have a number of years to go, then use the rule of 100. Your age represents how much of your portfolio should be in safer accounts and the difference (100 – your age) is what you can expose to stocks. The older you get, the more conservative you should be.

This simple approach works very well as you build a portfolio leveling out your returns.

As always, if you want to discuss your retirement planning with our team, feel free to give us a call. (775) 853-9033.

To read Bloomberg's full article: Click Here

Chris Abts