May You Live in Interesting Times

Another week, another new high in the markets. Last week the US Federal Reserve, in its quest to keep the US economy buoyant, announced a major policy shift. Our Federal Reserve has a “dual mandate” to combat inflation AND unemployment, unlike most other international central banks which only fight inflation. The US Fed announced, to push unemployment down, that they would allow inflation to run above their “red line”, for a period a time before taking steps to reduce it (a policy called “averaging”). There is more detail on the adjusted mandate in the attached research note.

On a related subject, now that we are past both political party conventions, we enter what is traditionally a volatile time (inside and outside of the markets). It makes us think of the old curse “may you live in interesting times.” Unfortunately for us all, the next six months promises to be historically interesting.