How the Fed Will Wean America From Cheap Money

Such a move would have to be well-timed to provide the right balance between support and allowing the economy to improve on its own. This policy would have to take into account actions of Congress regarding government spending (or not spending, a la sequester) because federal spending accounts for about 30 percent of the U.S. economy. This policy would also have to take into account the combined effects of the QE of other nations.

While big institutional market movers worry about what the Fed might do next regarding QE, you're probably wondering whether you should be worrying, too. The answer to this is yes – insofar as the overall direction of the market affects your returns – and no, insofar as your investment goals should be different than those of big institutional traders who search for hidden meaning in every ambiguous public utterance by a Fed board member.

While following the continuing QE saga in the headlines, here are some things to keep in mind:

• As the market goes up and down over anticipated QE changes, ignore these short-term gyrations and keep your eyes on the prize of long-term net returns. To the same extent that less QE sends the market downward, real economic recovery will eventually bring it up again.

• Expect the Fed to get it right. Sure, there's distrust aplenty in the government these days, but weaning the economy off QE without lasting harm is clearly doable because you can see results as you go along; this is not critical one-time surgery but a gradual treatment. If things go awry from cutting stimulus back too quickly, the Fed can always restore some degree of stimulus. The key will be to watch the scales go up and down to find the tipping point.

• There will be pain along the way, but this doesn't have to be your pain. Rise above the herky-jerky, cash-in-big-today market mentality by sitting back and benefiting from QE today and from real economic recovery down the road.

After all, if you don't believe that the economy will improve sustainably, rendering QE unnecessary, then what are you doing in the markets in the first place?

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

Ted Schwartz, a certified financial planner, is president and chief investment officer of Capstone Investment Financial Group. He advises individual investors and endowments, and serves as the adviser to CIFG UMA accounts. Because Schwartz has a background in psychology and counseling, he brings insights into personal motivation when advising clients on how to achieve their wealth management goals. Schwartz holds a B.A. from Duke University and an M.A. from Oregon State University. He can be reached at ted@capstoneinvest.com.

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