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"Fed" up?

The market turmoil continues and President Trump and everyone on street started talking about how Federal Reserve Bank (FED) is keeping its blinders on and intent on keeping up with its chosen path of increasing interest rates. Basically they are "Fed" up and wants FED to change its stance on interest rates. We had seen this movie before. Interest rates start going up, markets have tantrum hoping fed will chance its stance. Then monthly and quarterly economic indicators start coming and everything looks ok giving fed ammunition to keep up its course and then markets adjust back to normal. It's almost like markets have 10-year itch (there is 7-year itch term in relationships). It happened in 1987, 1998, 2008 and now 2018. While there would be some hit to confidence, recent market turmoil also helps take out the excesses and set a good foundation for further upside movement. Mid-term elections also add to the uncertainty even though most of the polls are predicting that congress will be split in which democrats taking house and GOP keeping senate. With such arrangement and recent economic background, President Trump is going to start talking about infrastructure bill in exchange for some concessions on immigration issue. Both are key policy topics for democrats so he will be able to make deals with Nancy Pelosi and Chuck Schumer.  The biggest issue to be resolved would be trade war with China. After elections, Trump and Chinese would start talking some conciliatory language giving impression that both sides want to resolve the issue and can avoid full blown trade-war. All of these would lead to markets coming to normalcy. So if you are long term investor, October had given good opportunity to cost-average your investments. So relax and enjoy Diwali and upcoming festivals!
/Shyam

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