Tags: Skousen | Fed | rate | stocks

Mark Skousen: 'We Are Still in Golden Age of Investing' for Stocks and Bonds

By    |   Tuesday, 26 May 2015 10:00 AM

The sluggish economy will keep the Federal Reserve from raising interest rates anytime soon, and that's good news for the stock and bond market, says economist/author Mark Skousen.

"On all scales the economy has definitely slowed," he told CNBC. GDP grew just 0.2 percent in the first quarter, and the Atlanta Fed's forecasting model puts growth at only 0.7 percent for the second quarter.

As for inflation, it remains far from the Fed's target of 2 percent, Skousen notes. Consumer prices slid 0.2 percent in the 12 months through April, and the Fed's favored inflation gauge rose only 0.3 percent in the 12 months through March.

"That's why the Fed is pumping more money into the system and why they're postponing raising the interest rates," Skousen argues. "They want to increase the inflation rate, and they're having a hard time doing it."

The Fed is "not going to be raising rates any time soon. That's the bottom line."

So what does this mean for investors? "We are still in the golden age of investing, and stocks and bonds are the place to be," Skousen notes.

Meanwhile, James Montier, a portfolio manager at money management firm GMO,
says we all may be just a bit too obsessed with Fed policy.

"There seems to be a perception that central bankers are gods (or at the very least minor deities in some twisted economic pantheon)," he writes in a commentary.

"Coupled with this deification of central bankers is a faith that interest rates are a panacea. Whatever the problem, interest rates can solve it. Inflation too high, simply raise interest rates. Economy too weak, then lower interest rates."

You might be getting the idea that Montier holds some doubts. Indeed, he does. "This obsession with interest rates as a cure-all rests on some dubious views about the way the world works," he writes. "It would appear that monetary policy isn’t the most effective tool for managing the economy."

The government should turn to fiscal policy instead, Montier argues.

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The sluggish economy will keep the Federal Reserve from raising interest rates anytime soon, and that's good news for the stock and bond market, says economist/author Mark Skousen.
Skousen, Fed, rate, stocks
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2015-00-26
Tuesday, 26 May 2015 10:00 AM
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