A New Sheriff in Town

As we previewed two weeks ago on LinkedIn, Federal Reserve Chairman Ben Bernanke will step down and hand the leadership of the Fed to newly appointed Janet Yellen.

You might imagine that being the chairman of the Federal Reserve is a very difficult job, and even even the best economies, it is. Janet Yellen inherits one of the most difficult tasks ever facing an incoming Fed Chair: figuring out what the second act of the largest central bank experiment in history will look like. There is no denying the tightrope she must travel to be successful in her leadership – and the consequences of any errors could be felt for decades.

Earlier this month when President Obama nominated Yellen, our own Phil Bervig sent out this tweet: #Bernanke took the Fed balance sheet from $860B to $3.8T. Now it’s Yellen’s job to undo it all without tanking the economy. #GoodLuck

Time will reflect more clearly on our time under the leadership of Ben Bernanke. He certainly tried to see his policies through to the end… he wanted to stimulate when the economy needed it, and then tighten when the economy was healthy enough to handle it. The trouble was, the economy never was healthy enough to grow on it’s own without QE (and it still isn’t).

Bernanke’s final effort came last month when he tried to “taper” his current round of stimulus, QE3… He did not support a stop to the stimulus, but rather a tapering of the strategy slowly and methodically. Alas, the economy wasn’t even healthy enough for a taper, so Ben will have to leave the second half of this story to his successor Janet Yellen as he leaves his post.

So what is Yellen likely to do? Will she reverse Bernanke’s loose monetary policies? Will she be the one to put a final end to QE? There are many questions, and we have strong opinions on these and welcome the dialog with our clients. We welcome guests to contact us as well, even if you have never considered our team your asset managers. Now is the time to discuss what these changes mean to your investment strategies, and consider the best and safest plans to keep your portfolios growing and stable.

For now, the good news is that we are through with the latest government shutdown and we can follow the Legislative branch’s lead by simply ignoring the federal default story for a while (or at least for 3 months tops). What a crazy, crazy time we live in friends… let’s stick together and make sure we are navigating with a clear sense of direction.

Categorized in: Blog

This post was written by Conscient Capital