Patient Minutes

Published on Jan. 15, 2019

Patient Minutes

In the News:

On Wednesday the Federal Reserve released the minutes from their December FOMC meeting. Many analysts agree that the Fed is showing a willingness to delay further interest rate hikes given the recent volatility in financial markets caused by increasing uncertainty in the overall global economic outlook. Michelle Meyer, head of U.S economics at Bank of America Merrill Lynch stated that “the minutes suggest a cautious approach to future monetary policy”. Inflation appears to be a concern as well. Last week Fed Chairman Powell stated, “We will be patient as we watch to see how the economy evolves, given the low inflation outlook.” He also stressed that monetary policy was not on a preset course. The FOMC “Dot-Plot” suggests that little change is on the horizon, but it does seem to indicate future additional tightening.

FOMC participants assessment of appropriate monetary policy

Our Thoughts:

We do not think that the Fed is done raising rates but more importantly the effects of those rate hikes need to be monitored more closely. Last year we saw 10 year treasury yields reach highs not seen in years but finished the year very close to how the year began. As with Fed Chairman Powell’s comments last week as per taking a “risk managed approach to policy decisions in coming months” we also believe a risk managed approach is warranted. We feel we have a unique perspective when it comes to fixed income and the generation of income. At Roosevelt, we believe in not taking excessive risks to generate income today that may jeopardize the ability of the portfolio to provide income in the future. To produce high levels of income, many portfolios assume a variety of different types of risks. We take a different approach. The Current Income Portfolio (CIP) seeks to benefit investors who desire high and reliable levels of income from an investment grade portfolio. CIP seeks to provide a substantial income stream by maximizing annual cash flows while preserving capital.

Note: Each shaded circle indicates the value (rounded to the nearest 1/8 percentage point) of an individual participant’s judgment of the midpoint of the appropriate target range for the federal funds rate or the appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run. One participant did not submit longer-run projections for the federal funds rate

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