Though it's had its ups and downs this morning, the Dow Jones Industrial Average (^DJI -0.98%) is just maintaining its course with a modest gain of 11 points as of 11:35 a.m. EDT. Though all eyes may be focused on Capitol Hill, investors don't need to waste their time on speculation. Once again it's become clear that actions speak louder than words.
Bernanke says more of the same
Starting off his two-day testimony in front of the House Financial Services Committee, Fed Chairman Ben Bernanke was once again in the spotlight as investors try to figure out the future of the Fed's tapering plan. But anyone trying to glean even the smallest nugget of new information will be sorely disappointed, because he's said all of this before.
The Fed's tapering is conditional upon continued improvements in the overall economic recovery, based on measurements from economic data that will change in the future and is not yet available. So there's no point for the average investor to get swept up in the hysteria we've seen over the past two months. As Bernanke reiterated this morning, tapering will likely begin later this year, but the Fed is flexible and will continue to be accommodating as necessary.
Earnings
As an alternative to the current Fed drama, investors have a perfect opportunity to judge their next steps based on businesses' latest earnings reports. This morning provided the much-anticipated report from Dow component Bank of America (BAC -1.07%). Since it was preceded by earnings announcements from the other big four banks -- JPMorgan (JPM 0.15%), Wells Fargo (WFC -1.11%), and Citigroup (C -1.09%) -- which all outperformed expectations, B of A had a lot of pressure to perform. It didn't disappoint.
With a massive reduction in expenses helping boost overall efficiency, the bank reported a 63% rise in earnings compared to last year. The expectations on Wall Street were blown away as B of A's EPS of $0.32 beat the $0.25 analysts anticipated. The cost-cutting at Bank of America has seriously boosted its chances of big success down the road as the economy continues to improve and revenues increase.
Of course, the one big area of focus for the bank's earnings was the mortgage operations. But much like with Wells Fargo's and JPMorgan's earnings reports, there were signs of weakness in the mortgage market that caused the banks to struggle to gain better footing. There is optimism growing, however, as yesterday's homebuilder sentiment index indicated that homebuilders are seeing more sales and anticipate better conditions over the next six months.
Finding a focal point
It's really hard not to get swept up into the Fed fever that's been swarming the market over the past few months. And there are plenty of reasons that the speculation over stimulus tapering is relevant to market conditions. But for long-term investors, getting distracted by a short-term transition period can be a costly mistake for your portfolio. For the banks mentioned above, there are plenty of concerns about the inevitable rise in interest rates -- from a slowdown in new mortgage applications to losses in investments -- but management is well aware of the risks and ready to take on the challenge.
If you follow the Foolish tenets of investing and have come to the conclusion that the company you've invested in has long-term viability, let that be your focus instead of the whirlwind ups and downs that come with speculation.
