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Making Her Bones

 

Federal Reserve Yellen followed up with further remarks to her first recent appearance as Chair. She is growing into the part, yet still finding her “center of the spotlight” voice. While these comments did not grab the markets attention, they illuminate the learning curve that all Fed Chairs go through when they assume the role.

A look at her comments, metaphorically in the photo on the left, showed a slight reversal or moderation to her earlier ones last week. This is the equivalent of “you did not understand me” in Fed speak.

While we expect this process to continue, there is a seasonal point to recall. Historically, the month of April tends to be strong for equities and May begins a seasonally weak time into the summer. So you can say there is a tendency in stocks to weaken and bonds to firm up in price. As mentioned, the markets and the Fed Chair are learning to communicate with each other. Combining the two would suggest a greater than average volatility to the season.

There are certain securities that do better in volatile markets and ones that do less well. In an upcoming note, we will review those we believed may cheapen and be worth consideration for the second quarter. We’ll be watching these closely as our new Fed Chair “makes her bones” in her new role.