I remain of the view that one of the biggest pieces of news for the year, in my opinion, was the FOMC meeting and the fact that the Fed came right out and said that the funds rate is now going to be held to the floor “at least through late 2014”. Not only that, but six of the 17 Fed officials don’t believe they will need to raise the funds rate until 2015-16.
The power of this time-stamped message should not be underestimated, and in a very uncertain world, it’s nice to actually be able to have conviction in something, which is that the Fed is not going to embark on a tightening cycle for several years. This means that all that idle cash earning nothing is going to look for a home to at least earn some positive return, no matter how modest. It also means that the fixed-income markets are going to be a very solid area to have exposure, since bonds simply do not go into bear markets until the Fed takes the carry away...
I think it bears repeating that when money market rates are zero, 5-year U.S. government bond yields are below 1%, and dividend yields at only 2%, what the markets are telling us is that secure income is a scarce resource and as such remains an enduring theme to invest around.
Note: DR's reccos from this piece include high quality corporate bonds, gold, gold mining stocks, and other hard assets. These are long-term themes of his but specifically mentioned today