While Wall St looks short term, you should invest for the long term


The biggest economic gathering of the year begins this week in Jackson Hole, Wyoming. Federal Reserve Chair Janet Yellen will be speaking on Friday, August 25th, and Wall Street traders will be looking for clues regarding the Federal Reserve's economic policies.

The Federal Reserve is our nation’s central bank. It's widely expected that the Federal Reserve will begin to reduce its ‘balance sheet’ beginning in September. The Federal Reserve bought trillions of dollars of mortgage and treasury bonds from 2008 through 2014 in order to help the economy stabilize and grow during and after the Great Recession. With the economy in much better shape today, the Federal Reserve can slowly reduce the number of bonds it owns, thus starting the process of reducing its balance sheet. The Federal Reserve is also thinking about raising the federal funds rate (interest rates) one more time this year. Simply Money Advisors believes that if the Federal Reserve raises interest rates, it will be in December. But in order to do so, we will need to see year-over-year inflation increase from the current 1.5% level. Chair Yellen may use her Friday speech to provide some insight to the Federal Reserve's interest rate plans.

Elsewhere, some investors on Wall Street are getting nervous that President Donald Trump's market-friendly economic policies might be in jeopardy, as President Trump recently dissolved his business advisory councils. Some are now worried that tax reform, financial deregulation, and infrastructure spending may not happen this year. Simply Money Advisors has said for many months that any positive economic impact of these policies may not occur until 2018.

The Simply Money Point

The U.S. economy is still growing, and there is little risk of recession. Simply Money Advisors believes the market-friendly economic policies will eventually get through Congress, and this will help the economy to continue to grow. This does not mean that there won't be ups and downs in the markets. However, the longer-term picture is positive. So, when thinking about the investment portion of your personalized financial plan, focus on the long-term – not the short-term political gridlock happening in Washington, D.C.

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