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So our floor traders just gave me the close -- view from action right there on the ground.
Now let's take you Ohio 100000 feet and explain what it all means for your investments for your portfolio the broader economy.
We've got to with the nation's most influential economists Anita mark how Scott.
Is Societe general's chief US economist she's with us from her company headquarters in new York and vanguard chief economist Joseph Davis with us from his company headquarters.
In valley forge Pennsylvania both giving us a great.
Point of view for people's investments Anita let me start with you -- Up you expected because I was reading all of your research you expected that we -- see outright QE3 -- did not.
Why do you think he didn't go that far this time around.
I'm actually not quite sure -- months at a left scratching my head because says the forecast revisions were quite significant as we expect said.
There is not much progress expect -- on the unemployment front for the next two years essentially the Fed sees.
Growth in line -- trends through 2013.
And inflation falling slightly below the Fed's target so I think there was yeah.
For them to do a little bit more.
And and not quite sure why the Fed chose -- more timid response I mean this came up several times during the press conference.
Com and Bernanke I felt like didn't really give a good response other than to say that the door remains open and they're ready to -- to do more.
Joseph some would -- -- timid some would call it conservative what do you call it and do you say it was the right course of action simply to extend.
The plan that he already has instead of coming all out with something new and part three.
What thanks for that I think it is we was important.
Actually delay for the moment clearly they wanted to extend -- he didn't that would be at the factors tightening but.
But their forecast revisions in my mind are clearly more pessimistic they're -- more realistic and we wouldn't be surprised that we saw further downgrades in the growth projections.
Over the next several months so.
-- more I thought matter more likely than not have when not if on QE3 but there are significant risk and it may be waiting for a break -- and volatility.
And greater risk aversion in the marketplace before they will be more definitive.
In their course of action.
You know -- -- point about how you said that there that the day today are looking -- Joseph calls it more realistic.
And in line with what he saw an and you call little just kind of really ugly basically.
There were a couple of comment stake in that statement in fact paragraph -- and here's what he said the Fed expects unemployment rate to decline only slowly.
Whereas back in April he it said.
It will -- -- declined gradually in economic growth will pick up.
Very gradually vs just simply gradually so now we're getting -- the dirt of good things are looking worse but only slightly incrementally according to the Fed.
Let's get to our investments here -- need to what does this mean yeah.
Force an asset bubble people rushing to find any kind of -- even though we hear over and over again that the retail investors just sitting on the sidelines cringing.
While that would be the case that the Fed gave us -- something a little bit more aggressive remembered that the twist.
Only works through the interest rate channel -- it does compressed or flatten the yield curve and give us lower long term interest rates.
But it does not -- what we call -- portfolio balance suspects so the Fed is nearly slapping assets they're not buying away I don't and you don't see up I'd.
Treasury -- -- too many people in the ten year and suddenly it's not.
Really returning much at all.
Well I think it is you have to look at it from the standpoint of of how the economy is responding to these low treasury yields.
You know in the historic context they're certainly they seem low.
But you know we've been at 2% for the past six months on the ten year treasury.
And there seems to be very little response from the real economy so I think maybe we need to rethink what that they knew -- equilibrium is.
And again given -- signals that up coming back to us from the real economy.
It doesn't seem like -- these -- levels of interest rates are particularly stimulative won't tell you offered vanguard get to see real close of investor sentiment are today.
Trying to jump in to too many dividend paying stocks and is that a bubble is that something to be -- Why -- they have to follow what we do all all investors have to appreciate and -- recognize that there's number three launch in terms of their purported decisions.
We are seeing investors continued to remain well diversified in and balance.
We are seen -- certainly more interest and in those investments that may have.
At least at the moment a higher yield to maturity or or dividend yield again we just continue to caution investors and I think most are responding.
Haven't actually been in a fairly prudent way.
Just to have eyes wide open when making a decision that we have been also very clear that bonds remain a key.
Remain a key diversify underperformed despite their muted return outlook community the current yield to maturity is that you can turn into bomb -- an extremely low but just low -- -- not mean they have to rise tomorrow and I think the Fed statement just another somber reminder.
That we can be in a very low interest rate environment for overhaul the securities and if that's true then treasury bonds may not be it's overvalued moment thing.
It's tough to decide what what the right answer is we so appreciate you both being here need to mark house -- Societe Generale chief US economist.
Vanguard's chief economist Joseph it.