On January 30, 2013, the FOMC (Federal Open Market Committee) declared that the Fed (the American Central Bank) would adopt an "accommodative" policy until a unemployment rate of 6,5%. On the other hand the real growth Americana still appears slow and one monetary tightening it seems far-fetched. But it is still correct to adopt a similar one monetary policy (in recent months the Fed has maintained a short rate close to zero, spent 85 billion dollars a month on the purchase of T-bills and Alternative Mortgage Assets, etc…)?
The American financial market has now reached its goals pre-crisis levels, the rate of unemployment continues to decline (while the workforce is growing), le banks do not record liquidity problems, the Consumer Price Index hit new highs.
Where is the crisis? If the Fed were to persist in such an "accommodative" policy, it could not end up creating one inflationary crisis?
On February 21, the stock exchanges recorded substantial losses following the declaration of some members of the US Central Bank according to which the measures adopted so far could end up causing economic and financial imbalances.
The stock volatility index (VIX) has never been lower in the last 6 years (click image to enlarge). This could be considered a sign of indecision, the fact is that in recent decades a situation of this kind has preceded a period of expansion in the market (see figure 2). I would therefore say that the American market is now entering a period of stability and their crisis is now behind us.
We certainly shouldn't expect constant price growth, however I think the low volatility can be seen as a positive sign.
It is also true that, up to now, the Obama government does not seem to have found it the way to handle properly the “fiscal cliff”. However, I believe that the Democrats are moving in the right direction and will be able to find the right agreement with the Republicans to solve the problem.
Summing up, I still think it's worth it investing in US stocks over the medium term. Investors are scared when volatility goes up and they are also scared when volatility goes down. Wouldn't it be better to embrace volatility as a travel companion?
