August 27 2014
What do Harry S. Truman and Hindu goddesses have in common? Both were invoked to describe Federal Reserve Chairwoman Janet Yellen’s speech at the Jackson Hole Economic Policy Symposium last week.
In her opening comments, Yellen confirmed the economy had improved and suggested more data was needed before the Fed could determine its path. She said:
“…our understanding of labor market developments and their potential implications for inflation will remain far from perfect. As a consequence, monetary policy ultimately must be conducted in a pragmatic manner that relies not on any particular indicator or model, but instead reflects an ongoing assessment of a wide range of information in the context of our ever-evolving understanding of the economy.”
Afterward, some Wall Street professionals empathized with Truman, the 33rd President of the United States and a native of the ‘Show Me’ state, who once lamented the lack of resolute economic advice available. Truman pined for a ‘one-handed economist’ who wouldn’t hedge by saying, “On the one hand… on the other hand…”
Barron’s reported on the speech saying, “In discussing the labor market… Yellen introduced so many qualifications that, instead of the proverbial two-handed economist, she more resembled a Hindu goddess with a half-dozen or more appendages.”
No matter what anyone made of Yellen’s remarks, she was in the catbird seat compared to European Central Bank (ECB) President Mario Draghi who spoke after her. Unemployment in the Eurozone stands at 11.5 percent compared to 6.2 percent in the United States. The range of unemployment across the region is quite significant, from 5 percent in Germany to 25 percent in Spain.
Investors and analysts may not have received the insights they’d hoped to gain about U.S. monetary policy, but it’s important to remember that one person’s hedging may be another person’s careful analysis.
- Data as of 8/22/141- WeekY-T-D1-Year3-Year5-Year10-Year
- Standard & Poor’s 500 (Domestic Stocks)1.7%7.6%20.0%0.2114.2%6.1%
- 10-year Treasury Note (Yield Only)2.4N/A184.108.40.206.3
- Gold (per ounce) -1.5 6.3-7.1-220.127.116.11
- DJ-UBS Commodity Index-0.2-0.3-2.8-7.8-0.5-1.6
- DJ Equity All REIT TR Index0.819.622.617.719.09.4