Did The Fed Throw Us A Change-Up?

by: Jay Okon

In baseball, a change-up is a type of off-speed pitch that is thrown at a slower speed than the fastball. The goal of this type of pitch is to disrupt the timing of the batter, lessening the chances of the batter hitting the ball.

The Federal Reserve released minutes of its February 13 meeting last Wednesday, and the minutes seemed to indicate that the Fed may be considering a rethink of its $85 billion bond buying program when they meet again on March 19-20.

The purpose of the bond buying program was to stimulate a moribund economy, but some Fed policymakers are concerned that its easy money policies might stoke inflation, a view which rattled markets last Wednesday and today, as investors fear an early end to the economic stimulus.

But the more pro-growth FOMC members, including Fed Chairman Ben Bernanke, are steering the decision making, and it seems the Fed is not likely to scale back bond buying until next year, when it expects that the unemployment rate would have dropped to about 7.5%. And with little or no inflation, relatively low unemployment, and an investor showing a willingness to buy into an anemic recovery - now is not the time for a change-up pitch from the Fed.

Historically, stocks have proven to be one of the most important assets in terms of building investment wealth, and the growing investor confidence has benefited U.S. stocks in particular. For years, the U.S. investor has been told that better value and returns can be found elsewhere - Europe, Asia, and the BRIC countries: Brazil, Russia, India, and China.

Lately, the U.S. investor has been trying to knock the ball out the park, with significant cash flows going into U.S. stocks, as evidenced in last Friday's rally based upon upbeat economic data, with stocks such as HP and Home Depot leading the way. U.S. manufacturing is making a comeback, the U.S. dollar is sustaining itself, consumer confidence is rising - now is the time for fast balls that the U.S. investor can hit, not slow pitches.

Although sequestration in Congress is looming, the U.S. investors' greatest past time has become investing in Made in America: stocks, bonds, treasuries. The Fed should just let us play ball.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.