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Expert Perspective

News, research and market insights from our team of experts.

Investment e.Perspective

Current Issue | April 27, 2017

On the Banks of the Snake River

By: Mark M. Green, CFA, Chief Investment Officer and Oxford Investment Fellow


Next month the Federal Reserve Bank of Kansas City will sponsor its annual Economic Policy Symposium, focusing on important issues facing the US and world economies. It is typically THE summer convention for prominent central bankers, finance ministers, academics and the like held in the idyllic location of Jackson Hole, Wyoming. While it may not sound exciting and is nowhere near as much fun as the national political conventions or the Olympic Games, it nevertheless has a loyal following of observers. In fact, Bloomberg TV and CNBC usually dispatch teams of reporters to cover not only the working sessions but also exciting features like "Inside the Central Banking Hangouts of Jackson Hole."

The theme this year is "Designing Resilient Monetary Policy Frameworks for the Future." Despite a somewhat wonkish title, the topic is actually quite important. And timely. Few forces are as powerful as global central banks when it comes to the financial markets, especially when their policies are coordinated and synchronized as they have been for much of the post-financial crisis period. Monetary policy measures during this period have truly been extraordinary in scale and unprecedented in nature.

And yet, the results have been mixed. Massive policy stimulus has driven interest rates to historic lows, yet the impact on real economic activity has been disappointing. Fundamental weakness in the global economy makes central bankers reluctant to raise interest rates, even in relatively healthy economies like the US. Hence cliché-like terms as "Lower for Longer" and "Secular Stagnation." The usual policy measures just aren't working as expected. Moreover, many analysts worry that distortions in the financial markets, resulting from outsized central bank intervention, may be sowing the seeds of the next financial crisis.

There is a general sense that the normal policy framework in which these banks are operating may be breaking down and a new paradigm is needed. What that new paradigm might entail isn't clear. Indeed, the old paradigm hasn't yet collapsed completely. But the Jackson Hole Symposium has often been a platform for new ideas and policies, and some insight may come out of the conference proceedings. We hope so, and will keep you apprised of any significant developments and their impact on our overall advice.

In the accompanying Investment e.Perspective article, Bob Schaefer, Oxford's Director of Investment Research and Oxford Investment Fellow, provides an analysis of financial market performance during the second quarter. He characterizes it as "Calm Amidst Confusion," remarkable for just how unremarkable it was. And yet, as he explains, there are some truly remarkable things happening around us – the Brexit vote in Britain, serious talk of "helicopter money", negative interest rates in major bond markets. At the end, Bob encapsulates our broad investment advice.

Also this month, we provide a link to another in our series of videos on the Core Principles that underpin Oxford's Investment Philosophy. In this installment, Cam Johnson, Senior Investment Strategist and Oxford Investment Fellow, discusses how behavior factors affect investment decisions and outcomes. Specifically, how human emotions (greed, fear, panic) create opportunities for the disciplined. Cam does a great job of explaining the impact of cognitive biases like loss aversion, availability bias and herd-like behavior on the decision making process.

The above commentary represent the opinions of the authors as of 7.28.16 and are subject to change at any time due to market or economic conditions or other factors.