I Don't Care!

All day long, financial reports, news and social media posts about whether the Fed is going to cut interest rates by 0.25 or 0.5 percentage points. Annoying. What's more, there's always talk of "25 basis points". Where every non-financial person asks themselves: "Basis what?"

I confess that I had some interest in the topic, as a Chief Investment Officer you can't completely ignore it. But all the fuss got too much for me. It inspired me to write the title of this newsletter and a social media post. 

And lo and behold, my head wasn't torn off. The reactions were along the lines of: "Same here!" and "I agree." Interestingly, also from the market commentators, who were still eagerly reporting on what was likely to happen. They're usually in positions where it's hard to escape the things you think you have to do. Part of the game and all that. 

Expectations and strategies

Yes, the decisions of the central banks have an influence on the markets and all of our behavior with regard to money, investment and consumption. Anyone with a variable loan will be happy to see lower interest rates and therefore lower loan installments. And the interest rate landscape naturally also influences savings behavior and the attractiveness of bonds.

If you read the reports, you actually think that the central bankers have our fate in their hands. And to top it all off, they are accused of knowing the future. Yet they act just like us "mere mortals". They observe and interpret the data and try to make the best of it. Just as we investors pursue our investment discipline, they have a strategy and expectations of the results. 

In the end, the US Federal Reserve lowered interest rates by half a percentage point. That was more than expected. But it did not shake up the financial markets. The stock markets shrugged their shoulders briefly and share prices climbed to new highs for the year. 

Once again, it confirmed: never put too much energy and emotion into a guessing game. It is better to think about your own investment strategy, refine it and implement it in a disciplined manner.