Jeff Voudrie of Common Sense Advisors says that tapering bond purchases has actually crimped economic growth. “Prior to the taper, the economy was growing, the US Dollar was strengthening and interest rates were going up.
(PRWEB) May 29, 2014
The Federal Reserve’s continued taper of bond purchases will be reaffirmed in the Federal Open Market Committee’s June 17-18 meeting, according to Federal Reserve Bank of New York President William Dudley. That’s unfortunate, says Jeff Voudrie, Investment Management Specialist at Common Sense Advisors, because tapering “has not had the impact the Feds expected”.
Voudrie pointed out that when then-Federal Reserve Chairman Ben Bernanke announced the tapering of Fed bond purchases in April/May 2013, “bond prices dropped and interest rates shot up,” adding that the 16.5% decline in bond prices the five months after Bernanke’s move “resulted in significant bond losses for those owning bonds.”
Voudrie does not share the optimism that Dudley shared in the Bloomberg article, where Dudley told reporters that he expected a 3% rate of economic growth for the remainder of 2014 that would push interest rates up to the Federal target of 2%. Fed Chair Janet Yellen said in May 7 testimony before Congress that the Fed would stop buying bonds altogether in the fall of 2014 if employment numbers continued to rise healthily.
Yet, Voudrie says that tapering bond purchases has actually crimped economic growth. “Prior to the taper, the economy was growing, the US Dollar was strengthening and interest rates were going up. Since then,” he noted, “the economy has been slowing, the US Dollar has been declining and interest rates have been declining.”
That leads to his opinion that “even though the Fed is tapering in an attempt to cause interest rates to rise, the opposite is occurring because the markets recognize the lack of strength in the overall economy.” Voudrie cited statistics such as a slow in U.S. GDP growth in the first quarter of 2014 compared to the third quarter of 2013 (4.12% to .11%), a similar slowdown in retail sales growth (2.45% to .68%) and a drop in exports (-1.07%), among other indicators comparing the two quarters.
With this apparent weakness in the economy, it’s no time for investors to stop paying attention to their investments, Voudrie concluded, especially if the Feds continue to pursue a strategy that has slowed growth to this point. For this reason and others, Voudrie advises his clients to seek out personal money managers rather than turn over their investments to an annuity salesperson.
In addition, with the built-in weakness of the current economy, huge losses must be avoided at all costs. That makes the patented software that Voudrie offers his clients a model for careful monitoring of investments, as the program is able to respond to market movements quickly before huge losses can accumulate.
Jeff Voudrie, a financial planner in Johnson City, TN has been interviewed by The Wall Street Journal, CBS MarketWatch, The London Financial Times and the Christian Science Monitor. He is a former syndicated newspaper columnist and the author of two ground-breaking books: How Successful Investors Tripled the Return of the S&P 500 and Why Variable Annuities Don’t Work the Way You Think They Work. He accepts a limited number of new clients in his personal investments management practice. He and his wife Julie live with their seven children in Johnson City, TN. He is heavily involved in his local church and has done missionary work in Hungary and Cambodia.
Common Sense Advisors
105 Keeview Court
Johnson City, TN 37615