The short tour of Janet Yellen leading the United States Federal Reserve (FED) has come to an end. In a few weeks the new name that will direct the monetary policy of the United States will be known. A factor that can have a great effect on equity markets in this country, but also in other international geographic areas, such as the EU. Not surprisingly, it is responsible for many of the decisions that end up impacting the financial markets. For this reason, it is not surprising that in the coming days the stock markets show a certain nervousness about the decisions that may be made in the coming years.
On the other hand, your opinion on the withdrawal of economic stimuli that has already begun under Yellen's mandate will be very relevant. Because any deviation from the strategies to take can involve very sharp movements in the equity markets. Both in regard to one way or the other. With a direct impact on investments that at this time you have open in the equity markets. For this reason, the expectation generated so far is highest among small and medium investors. On what will be the recipes that the new governor (or governor) of the FED will apply.
In this sense, at the moment no special name sounds. Although the pools of financial analysts point to two people with a highly qualified profile to play this important role in the economy of one of the world's powers. Who seems to be taking more strength in the last hours is Jerome Powell, the least aggressive candidate. The other candidate is John Taylor, and he is considered by the markets as a more aggressive figure in their approaches. It seems that they are the figures that the president of the United States, Donald Trump, is considering to direct the monetary policy of this nation for the next few years.
EDF: reduction of stimuli
In any case, it seems that the passage of Janet Yellen at the head of the Federal Reserve of the United States is already amortized. Wherein the October meeting it was already announced that it was beginning to reduce the Fed's balance sheet. So bulky by successive QEs, which already represents more than 4,5 trillion dollars. Now the question that financial analysts ask themselves and if the new economic team will continue with the same strategy. All indications point to this being the case. But some surprises are not ruled out either, which will in the end be those that may change the direction of the bags during the next few days.
The new appointment will not have to wait long. To the extent that the President of the United States, Donald Trump, has confirmed that will announce his replacement later this week. Or at the very beginning of the next one. In this sense, it will be very important to check how the markets receive the new governor of the FED. It will be a clear signal about where the shots can go. It may even be a stimulus to open or close trades on the stock market, depending on your intentions.
December rate hike
Either way, there is one thing for sure and that is that one of the highlights will unfold during the month of December. Not surprisingly, it is the date chosen for the Federal Reserve of the United States raise rates for the third time this year. This time, up to the 1,25% and 1,50% zone. For the moment, the application of this monetary measure does not seem to have excessive repercussions on the equity markets. But it will be very important to have the opinion of the new Fed governor on the table. It can be the spring so that the bags of the whole world turn downwards or on the contrary upwards. You must be expectant so that you can anticipate the movements that will be triggered in the markets from now on.
On the other hand, it will be necessary to see if in the month of December, when his last appointment approaches, the economic situation will change, although it does not seem likely. Because any substantial change in the main economic parameters can represent a turn in the equity markets. Although not with the magnitude and intensity that some financial analysts warn. Because the most general opinion among them is that everything will continue as before. With slight modifications in the Federal Reserve's approach from United States. In any case, you will have to be very expectant if your intention is to buy and sell shares on the stock market.
Monetary policy maintenance
In this sense, the outgoing team has been very clear about their true intentions. To the extent that the current governor, Janet Yellen has already said at times, that the current state of the economy has reduced these types of equilibrium from historically normal levels. It seems that the new rectors of the FED follow this same strategy line. Now they only need to confirm these intentions. It's something the financial markets are looking forward to. And of course yourself so that you know what decisions you have to make to make your savings profitable from now on.
Faced with this scenario, there are already several qualified voices that indicate that it would not be very strange for the FED to boost two or three increases during 2018. Something that in his opinion should not affect the behavior of the stock. Both in the United States and in the European continent to a lesser extent. With two parameters that will be very important to take them into account. On the one hand, the fact that unemployment rate is at a minimum of 4,2%. And on the other hand, because wage pressures continue to appear. Factors, in both cases, that can tell the monetary policy of the new team.
Wait to make decisions
One of the repercussions of this fact in the economic policy of the United States is how the equities can develop from this important change in the FED. So that in this way, your decisions have a greater protection in operations. Well, first of all you will have to wait for these changes to occur before making any decision to enter or exit any of the financial markets. It does not matter that you wait just a few days because it will be worth postponing this position. Even if you have to wait a few days and lose part of the bullish or bearish journey that develops.
If everything develops normally and everything continues as before, it could be a good opportunity to take positions in the stock market. Because you cannot forget that you are facing one of the most bullish quarters of the year. Where the revaluations of the values exceed 10% a certain ease, as they have happened in recent years. Not surprisingly, few are the quarters of this period that have suffered cuts in the value of prices. Given this reality, it is an invitation for you to invest your money in the stock market, depending on your preferences regarding the geographical areas where you want to operate.
Investment tips
In any case, it will always be very good for you to apply some behavioral guidelines. So that in this way, provide greater security to each of the operations that you are going to develop from now on. These are some of the most relevant.
- Don't try to streamline operationsInstead, you have to wait to see who is the new rector of the FED.
- The movements in the stock market are not expected to be very aggressive and therefore you will have to risk if you want to wide the profit margins of the operations.
- This decision will have a minor impact on the financial markets of the old continent. You can choose this destination to avoid speculative movements in the markets.
- An excellent idea to protect your positions in equities is diversifying investments. You should not allocate all your savings to a single security or financial asset.
- The divergence between the US and European markets may be more pronounced from now on. But at the same time it can give you greater opportunities in the investment sector.
- The market foreign exchange it may be one of the most interesting right now. But with the disadvantage that you will need more knowledge in financial culture to open positions in some of these financial assets.
- The appointment of the new governor of the Federal Reserve of the United States may affect you in the short-term operations. On the other hand, in the medium and long term, what will allow you to be more expansive in the approaches you are going to take will be different.
- Don't try to rush operations during these days since in these scenarios you have more to lose than to gain. Keep this in mind so as not to take the odd surprise in the next few days. Where precaution will be one of your main allies.