Recently the discussion surrounding central bank philosophy and action has increased. We can thank Japan for the majority of this focused commentary, but other global banks are acting in a similar manner and trying to signal to one another what the other might be doing. Most Bank’s efforts have been focused on repurchasing bonds in the secondary market to keep rates low and force investors into purchasing more “risky” assets thereby increasing liquidity.
During the past couple of months this strategy has seemed to work as most equity indices continued to rise regardless of the economic data released. In the back of our minds remained the question: What happens when the FED, (or other central banks), stop the repurchases? I can’t say that we have seen the answer to that question yet, but the past two weeks has seen increased market volatility as published opinions on the time frame of Bank’s bond purchasing programs differ. The FED will continue to impact the movement of the market, but the differing opinions of FED specialists has brought traditional market moving data back to the forefront.
Of course, on a granular level measures such as productivity and cash flow never went out of style. That is why we continue to believe in adjusting asset allocations, but basing investment decisions on a process that was formed in academia and polished through experience. Invesco calls it: “Intentional Investing*,” and it’s how Heritage Wealth Architects aims to create more enjoyable moments.
*” Intentional investing is the science and art of investing with purpose, prudence and diligence. It’s about thinking carefully, planning thoughtfully, and acting deliberately”