Houston News

 

Investors Encouraged by Fed Stimulus Plan

Investors Encouraged by Fed Stimulus Plan

The stock market closed at a record high Wednesday after the Federal Reserve's decision to keep its economic stimulus in place.

The Fed will continue it's $85-billion-a-month bond purchase program, forecasting just three-percent economic growth next year.

KTRH money man Pat Shinn says the unexpected decision is welcome news for investors.

“They're going to keep buying up treasury and mortgage backed securities because they see the risk of some volatility coming out of Washington – Congress is going to be debating whether to raise the debt ceiling,” says Shinn.

“They're basically saying the economy is positive, we're seeing corporate profits growing, but at the same time we're not seeing them grow at such a pace they can pull back or take away the monetary punch bowl,” he says.

The Fed says rising mortgage rates and government spending cuts have restrained economic growth.

North Texas financial strategist Clark Hodges says many Americans are banking on rates going down again.

“They're taking a chance by doing that,” Hodges tells KTRH News.  “It has frozen some of the real estate activity with those rates going up.

Unemployment remains well above the 6.5 percent the Fed is waiting for, and the situation may continue deep into 2014. 

Hodges believes policies such as Obamacare are keeping people out of work.

“I think a lot of companies that could be growing right now and adding new employees are sitting on their hands because they don't know what it costs,” he says.  “I think that cloud will be hanging over our economy for at least another year or so.”

Still, many investors believe Fed Chairman Ben Bernanke is on the right path.

“He successfully brought long-term interest rates down, and he basically spurred on the housing sector,” says Shinn.

 

More Articles