The market turned in a winning week as the SPY advanced by 2.23%, the overall market as measured by the VTI was up 2.1% and the international markets, x-US, as measured by the VT was up 3.37%. Bonds, as measured by the AGG, were up 0.9%. The WisdomTree Europe Hedged Equity Fund has been in what seems like dozens of articles over the last couple of weeks. This fund invests in Europe but hedges away the currency risk. It has had a banner year and is up 15.68%. I am wondering if its rise from obscurity will slow its increase now that the word is out. HEDG increased 0.4% for the week.
The big news for the week was the Fed removed the word “patient” from it guidance. The market had anticipated that if “patient” was out, then a June rate increase would be in, and that was a big factor in the slight declines over the previous three weeks. But leave it to the Fed to do whatever is necessary not to upset the markets in the slightest. The Fed managed to remove the word “patient” and at the same time, convince everyone that they will be more patient than ever before. Yellen said “because we removed the word ‘patient’ from the statement doesn’t mean we are going to be impatient.”
So now, investors are thinking that June is probably out and that September is probably the in, but maybe the first rate increase won’t be until January! The markets loved it and it sent stocks higher on both Wednesday and Friday to lead the nice increase for the week.
The problem is that the continued suppression of interest rates leads to the misallocation of assets, and pushes financial markets higher than they should be. I have to believe that a very small increase in rates when the economy is relatively strong would be a good thing right now, even if it upsets the markets in the short run. But it looks like we are in delay mode again.