The Fed needs to spend less time paying attention to investors.

Investors need to spend less time paying attention to the Fed.

I know the incessant media coverage makes it impossible for investors to ignore FOMC decisions, but be objective. Look back on the past several months and all the Fed watching you may have done or been subjected to. Which investing decisions did you make based upon the speculation? Which investing decisions did you make based upon the actual rate changes? How have those worked out for you?

There’s lots of debate about whether today’s cut or future cuts should be Zero basis points, 25 bps, 50 bps, 75 bps…..Be objective. What impact did the amount have on your actual investing performance? It is impossible to measure how the market will react to any cut for more than a few minutes. How can anyone assure you that a cut that didn’t happen to the degree they wanted made any difference to your portfolio performance? For example, did the September 50 bps cut perform better than a 25 bps cut would have? What about a 75 bps? In October and December, did the 25 bps cause you to make less investing decisions than a 50 bps cut would have? We just cannot know those things.

Next comes the debate on wording in the statement. Is it hopeful enough? Does it leave room for or hint at future cuts? Is it too hawkish? What words were changed since the last statement? What did they mean by saying one thing over the other? I know a lot of people care about such things, but seriously…can you honestly tell yourself that the interpretation of a Fed statement caused you to buy a stock or not buy a stock?

What about dissension? Does it matter whether Poole dissented last week? Is it his fault that we didn’t go up 1,000 points on the Dow vs. only 800?

There is so much time and effort spent analyzing the next Fed move and yet, its effects on portfolio performance are unknowable. What I do know is that spending the same amount of time doing fundamental and technical research will enhance your performance and risk management. Please do your best to ignore watching the Fed.