Vanguard Chief Thinks Fed Should Stop Teasing Investors

federal reserve buildingWhen a big fund manager starts comparing the Federal Reserve to a comic strip character, you know it has an image problem.

But that's how Vanguard Chief Investment Officer Tim Buckley characterized the central bank's interest rate policy at an annual Vanguard investor conference outside Philadelphia.

Buckley likened the Fed's reluctance to raise rates -- despite repeatedly hinting it would do so -- to Lucy urging Charlie Brown to kick the football in the Peanuts comic strip. Every time investors believe it, the Fed yanks the ball away at the last minute and investors land hard. Needless to say, investors don't like feeling like Charlie Brown.

Buckley, who oversees $2.7 trillion in investments at Vanguard, the largest mutual fund company, talked not only about the Fed but the U.S. economy and investment strategies. His audience was the Bogleheads, a group of die-hard fans of Vanguard founder John Bogle, the inventor of the low-cost index fund.

Buckley, who oversees $2.7 trillion in investments at Vanguard, the largest mutual fund company, talked not only about the Fed but the U.S. economy and investment strategies. His audience was the Bogleheads, a group of die-hard fans of Vanguard founder John Bogle, the inventor of the low-cost index fund.

"It'll be a very good sign" when the Fed does raise rates, Buckley said.

Buckley also addressed the Aug. 24 market convulsion, which has been dubbed by some commentators as "Black Monday."

"Volatility in August. It's not supposed to happen," Buckley said. "It's supposed to be sleepy markets. Then boom." Buckley said it was reasonable for investors to be concerned now.
Valuations are on the higher side," he said. Price-to-earnings ratios are elevated, and stocks don't look cheap anymore. "People are more likely to get vertigo," he commented.

Volatility and uncertainty aren't just limited to the U.S. Buckley noted that the recent plunge in Chinese stocks shook confidence both in China and throughout the globe. By devaluing the yuan after a market drop, China suggested, in Buckley's view, that "Maybe they're not so in control." Maybe China can't manage its economy as much as it seemed, and maybe economic growth there is more like 3% to 4%, not the anticipated 6% to 7%. That would be worrisome.

All in all, Buckley seemed to look forward to a market in which conservative investors can get some yield and return from lower-volatility, lower-risk bonds, instead of buying stocks because they need more return.

Source: thestreet.com

Subscribe To Our Newsletter

About

i-BROKER is a free online trading platform designed to help investors trade and monitor their securities on the Ghana Stock Exchange.

CAL Brokers Ltd.
P.O. Box 14596
Accra, Ghana

Tel: +233 302 680061-9
Fax: +233 302 680081
e-mail:info@ibrokerghana.com

i-Trade

market marker map base pin 512Direct access to the Ghana Stock Exchange to place, buy and sell  online!

Exclusive to iBroker. Click here to login