Fed Chief Powell Talks, Investors Listen - February 12, 2020

Fed Chief Powell testifies on monetary policy before two Congressional committees twice a year. He’s talking Tuesday and Wednesday.

Representatives ask about the economy, but political posturing by both sides is inevitable. Tuesday’s Q&A with Powell uncovered nothing new.

On economic matters, Powell said the economy is in “very good shape.”

  • We’re in the 11th year of a record economic expansion.
  • “Job gains averaged 200,000 per month” in the second half of last year.
  • Consumer spending has moderated, but fundamentals supporting spending “remain solid.”
  • Manufacturing, exports, and business spending have been weak.

On the epidemic in China, “We are closely monitoring the emergence of the coronavirus, which could lead to disruptions in China that spill over to the rest of the global economy,” Powell said.

He said the Fed doesn’t see a need to adjust interest rates. However, a key measure of sentiment published by the CME Group is currently pricing in up to two ¼-percentage-point rate cuts by year end.

Powell said policy is not on a “preset course,” and adjustments will occur based on the economic outlook.

Unless the economy materially slows, rates are unlikely to decline this year.

Investor’s corner

Economic growth and low interest rates have been supportive of stocks. Risks never completely dissipate. But a well-crafted, long-term investment plan provides a roadmap for the investor and sets one a path toward his/her financial goals.