You are straight up lying if you left Fed Chair Janet Yellen's press conference Wednesday with any sense on the direction of monetary policy.
At least that is what I am telling myself, after being glued to the TV watching the always-eloquent Yellen joust with headline-seeking reporters. I must admit that with each Fed meeting over the past year, I have become more and more confused on what the Fed could do at upcoming meetings. If you asked me earlier in the year, I would have said the Fed will have already moved higher on rates, given its adherence to a data-dependent approach and subsequent strong jobs gains. But with continued downward revisions in U.S. GDP growth, I could have easily seen the Fed actually pull its December rate hike off the table, in order to avoid a deeper slowdown.
Such is life, when trying to gauge the moves of a data-dependent Fed.
Nevertheless, the takeaway from Wednesday's latest Fed spectacle may be to invest nothing long-term in the stock market. Instead, position yourself in favorite stocks in the days ahead of a key economic report. If you have a great sense the June employment report will surprise to the upside, then buy JPMorgan Chase (JPM) because the Fed may lift interest rates at its late July meeting. If you think June employment numbers will be weak, buy consumer staples such as Hershey (HSY), as the Fed will likely leave rates unchanged in July and send everyone into safety names, due to a perceived material slowdown in the U.S. economy.
It's that washy-washy right now when it comes to Fed policy. This underscores why average investors are at a severe disadvantage to institutional investors like never before (which also means they should pay the money and seek professional asset allocation help). I think this confusion is best captured in some of my tweets during Yellen's press conference.
On the one hand, Yellen opened the door to a July rate hike.
Then again, she stressed consistently that the U.S. economic outlook is uncertain and that interest rate policy was not on a preset course.
Yellen signaled strongly there is a growing lack of consensus inside the Fed on policy. This is horrible news to hear, as the Fed tries to unwind.
Despite a slowing labor market and U.S. economy, Yellen seemed upbeat on wage inflation. Huh? And she sees a sizable rebound in the U.S. economy in the second quarter? Did she and her buddies, inside the Fed, dig into first-quarter earnings season?