July 17, 2012
Federal Reserve Chairman Ben Bernanke testified before the Senate Banking Committee this morning, and the big question that the panelists keep grilling Bernanke about—and what is on the top of all investors' minds right now—is quantitative easing.
I have to say that it is amazing to me that no matter who is at the helm in the Fed, the "Fedspeak" is always the same—vague and non-committal.
Bernanke has been intentionally elusive in his comments about more quantitative easing, the tools that are at his disposal and what exactly is on his short list of ideas. Senators Johnson, Crapo, Reed and Corker (in that order) all asked him point blank what tools he would use and what action he would take to help the recovery.
Each time he said that there are tools, we need a plan, we need better fiscal policy and the Fed will take action if needed. This doesn't exactly give us much new info.
So where does this leave us? Investors are feeling the pain of the economic slowdown and many are looking for the Fed to take more action beyond "Operation Twist," which the Fed recently expanded by $267 billion and pushed back from its June 30 expiration date to the end of 2012. The bottom line is that the Fed is limited in what it can do at this point and that they are already using the biggest tools in their toolbox.
Now, the Fed will have to do something if jobs growth does not improve or at least show signs of improvement. This and keeping inflation in check is their official mandate. But, we are just not going to get any insight today into what this action could be.
I'll be closely watching Bernanke's testimony tomorrow when he'll be facing the Financial Services Committee and will update the blog with the details as they apply to the market and growth investors.
For now, I see a strategy of investing in stocks with strong sales and earnings growth (and those that pay a dividend, if possible) is the best way to play the current economy. These stocks have been an oasis for investors and will continue to experience strong buying pressure no matter what happens with the economy or Fed action.