Economics of Liberty

What happens when the Fed stops pumping? Heather Hughes Reports (VIDEO)

Stimulus now! Stimulus Forever?

The Federal Reserve decided not to cut back its monthly bond purchases, which will allow interest rates to remain low in order to artificially stimulate economic growth. SunAmerica’s Heather Hughes appeared on CNBC recently to discuss her economic forecast in light of the Fed’s decision. She believes that the Fed decision has a lot of people frustrated by not being able to find a bottom on the market. The Fed is sending mixed signals to investors, making them wait on the sidelines. Ms. Hughes believes that a lot of the losses that may come if the Fed cuts off stimulus could already be priced in, meaning the investors were prepared.

Hughes offered her opinions on the best indicators of the health of the economy during an interview on CNBC Thursday.

Heather’s Insight

Heather’s Insight

It’s a stock pickers market!

Stock correlations have dropped to 2007 levels, still relatively high speaking, but this may bode well for stock pickers into year end.  Instead of a macro-driven market, Beta =1, all stocks moving in tandem or parallel with the broad market indices.

End of year market strength?

The Baltic Dry Index- the Baltic Dry Index broke a new 2013 peak signaling global strength. The Baltic Dry is a proxy for shipping capacity on a global scale because it primarily consists of raw materials. It’s a leading economic indicator because it predicts future economic activity.  So if earnings guidance increases (revenue growth being the biggest driver) coupled with increased shipping, this may prove very healthy for the markets.

What about the Fed?

You can’t suppress rates for a prolonged period of time without having a sort of negative effect in the future. Although there is no doubt the housing market recovery would not have happened without the Fed…We may be distorting financial market and encouraging excessive risk taking.

Bio: Heather Hughes is an institutional financial sales executive as well as a lover of liberty and the free market. She is a weekly contributor to The Libertarian Republic and an expert on money and the marketplace.

Follow Heather’s reports here. 

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