Why Didn't The Fed's 'Patience' Translate Into Market Gains?

On Wednesday, January 28, the U.S. Federal Reserve wrapped up its monthly meeting without making any changes to the nation’s monetary policy.

The bank released a statement saying that it would be “patient” in regard to tightening, suggesting that the bank would make a decision about when to raise rates later in the year.

Most have pushed their expectations for a rate hike back to mid-summer from March, but markets fell regardless of the Fed’s cautious approach.

Positive Outlook Disappointed

The Fed’s outlook for the U.S. economy was a rosy one. The bank said job growth was strong and economic activity was stable, suggesting that the nation has pushed through a period of global economic uncertainty relatively unscathed.

Investors saw the positive outlook as a good indicator that the Fed was still eager to tighten and responded nervously.

Many believe that the optimistic forecast was a signal that the bank will raise rates some time this year, despite foreign pressures on the economy.

Related Link: 3 Key Takeaways From The Federal Reserve Statement

Currency Wars Weigh In

Investors are also worried about the potential for currency wars as several major central banks inject liquidity into their economies and in turn, devalue their currencies.

The European Central Bank’s recent quantitative easing program was the latest in a series of central bank moves that sent the dollar 15 percent higher than most of its peers, and ate into corporate profits in the U.S.

Many worry that the People’s Bank of China will be next, something that could leave U.S. goods unable to compete in the global marketplace.