Why Genuine Investors Can Tune Out Fed-Mania This Week

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

Today is light on economic data, so it's perhaps no surprise that U.S. stocks opened essentially unchanged this morning, with the S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) up 0.17% and 14%, respectively, at 10 a.m. EDT.

Looking ahead this week, there are at least a couple of events that have the potential to inject a little volatility into these lazy August days. And what is the market fixated on right now? The same thing that has held investors' attention since the end of May: the possibility that the Fed will begin to wind down its $85 billion in monthly bond purchases, with a goal of ending its "quantitative easing" program next year.

This week's calendar contains two events that relate to the Fed:

  • On Wednesday, the central bank will release the minutes of the Federal Open Market Committee's July meeting. The FOMC is the group that sets interest rate policy -- including the when and how of quantitative easing.
  • The Federal Reserve Bank of Kansas City hosts its annual retreat from Aug. 22 through Aug. 24. This has become a highly anticipated event since Fed Chairman Ben Bernanke pre-announced the second round of quantitative easing at the 2011 conference. However, Bernanke will not be attending this year -- it's the first time he won't be attending since he became head honcho at the central bank. Instead, vice-chairman Janet Yellen, who is thought to be one of the two candidates most likely to succeed him, will be making a speech.

Traders will be intensely focused on both of these events, but I'm not anticipating any surprises here.

What about long-term investors? Should they be concerned about the Fed this week? The short answer is no. Neither of these two events is likely to have any impact on long-term business values, and so long as you are inoculated against a little short-term volatility, they should have no impact on your behavior (except inasmuch as volatility produces opportunity for attractive purchases). If you're a genuine investor, business values should be your primary focus when you're analyzing the common stocks you own -- and those you wish to own.

That is exactly the thinking that drove the Motley Fool's chief investment officer ing selecting his No. 1 stock for this year. Find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.


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  • Report this Comment On August 19, 2013, at 10:25 AM, PEStudent wrote:

    "Genuine" investors can tune-out the Fed "this week

    "?

    Microfundamental Investors - following Graham, Buffett, Greenwald, etc. - pick stocks of companies that are sound but their stocks are not properly favored. That could take a few years - not just "this week"!

    For example, Bank of America is just now returning to positive earnings, is now being charged big time with misleading investors, and may not be properly valued until 2015 or later. But NOW (or even better, a year ago) is a good time to invest in it.

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