Page 25 - ARUBA TODAY

BUSINESS Monday 6 noveMber 2017
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After the Fed’s great unwind begins, the stock market yawns

By STAN CHOE level since March. Much of interest rates.
AP Business Writer the increase was the result — The economy is better
NEW YORK (AP) — The first of a strengthening econ- able to stand on its own
month is in the books for the omy, along with anticipa- without as much Fed sup-
Federal Reserve’s yearslong tion of President Donald port. The economy grew at
process of pulling the plug Trump’s choice for the next a 3 percent annual rate last
on its bond-purchase pro- Fed chair. quarter, even though hur-
gram, and markets took A lot is riding on whether ricanes shut down a wide
things in stride. markets can remain calm swath of businesses. The
It’s a massive undertaking as the program further unemployment rate is also
for the Fed, whose invest- winds down. Studies have at a 16-year low, and oth-
ment portfolio swelled to suggested it was powerful er economies around the
nearly $4.5 trillion. Econo- enough to pull the yield on world are hitting a higher
mists credit the program the 10-year Treasury note gear.
with helping push U.S. stock down by 1 percentage It’s a much different picture
funds to returns of more point as of the end of last This photo shows the Federal Reserve Building on Constitution than when the Fed was
Avenue in Washington. The Federal Reserve has begun the slow
than 300 percent since the year, when it was around process of paring back its $4.5 trillion bond portfolio, and the buying bonds in the years
spring of 2009. 2.47 percent. stock market’s reaction has been barely a yawn. A lot is riding following the Great Reces-
A worry was that the pro- Most analysts expect a on whether markets can continue to remain calm. sion. Then the economy
gram’s end would mean gradual increase in the 10- (AP Photo/Pablo Martinez Monsivais) needed the stimulus. Plus,
pain for the stock market, year yield from the current prices for stocks relative to ing paint dry,” and the pro- the cumulative effect of all
just like it provided succor 2.35 percent, as the Fed earnings. gram is supposed to run that aid for the economy
on the way up. In the past, continues with the portfo- A sharp rise in interest rates quietly on autopilot in the means financial conditions
even the hint of a slow- lio unwinding and raises in- would also leave bond background. are still relatively easy now,
down in bond purchases terest rates. But if rates rise fund investors with losses on With President Trump tap- even after the Fed has be-
was enough to send inves- faster than expected, say what are supposed to be ping Jerome “Jay” Powell gun its slow pullback.
tors into a “taper tantrum” as a result of a burst of in- the safe parts of their port- to be the next chair of the “The Fed has so overdone it
and cause interest rates to flation, markets could get folios. Fed, economists expect this for so many years, they’ve
jump. upset. Here’s a look at several rea- to continue. Powell was al- taken monetary policy
But the stock market calmly A jump in rates would sud- sons why analysts say the ready a Fed governor, and so far out of bounds, that
set more records in Octo- denly rob stocks of some of market has been so calm economists say he is not as they may have to tighten
ber, as the Fed let $10 bil- their attractiveness. Even about the Fed’s balance- aggressive about raising in- for a while before they get
lion of Treasurys and mort- though stocks look ex- sheet moves so far: terest rates as some of the back inbounds,” said Jim
gage-backed securities in pensive relative to history — This was exactly what the other finalists would have Paulsen, chief investment
its portfolio mature without based on how much profits Fed wanted to happen. been. strategist at the Leuthold
reinvesting the cash. The companies are producing, Following the 2013 “taper Powell should continue the Group.
pace will gradually rise to they don’t look expensive tantrum,” the central bank policies laid out by current — Other central banks are
$50 billion per month by the when compared against has gone to great lengths chair Janet Yellen, econo- still pumping lots of stimulus
end of next year. the small interest payments to telegraph its moves. mists say. That means stick- into the global economy.
The bond market was more from bonds. If rates jump, Fed officials have said they ing with the already stated The European Central Bank
exciting in October, as the investors would likely be- want the drawdown of the plan for reducing the Fed’s is still buying 60 billion euros
yield on the 10-year Trea- come much less willing to central bank’s balance balance sheet, as well as of bonds each month, for
sury touched its highest continue paying such high sheet to be akin to “watch- gradually raising short-term example. q

Insurance loss from disasters cuts profits at Buffett’s firm

By JOSH FUNK Geico and several other $1.40 per share. Edward Jones analyst Jim surance losses Berkshire
AP Business Writer insurers, including General The five analysts surveyed Shanahan said the insur- reported in this quarter
OMAHA, Neb. (AP) — War- Reinsurance. by FactSet expected Berk- ance losses were larger weren’t far behind the $3.4
ren Buffett’s Berkshire Ha- Berkshire said it earned shire Hathaway to report than he expected. billion in hurricane-related
thaway Inc. said Friday that $4.07 billion, or about $1.65 operating earnings per He noted Buffett said in Au- losses Berkshire recorded in
its third-quarter profit fell 43 per Class B share. That’s Class B share of $1.59. gust that Berkshire’s expo- 2005 when Hurricanes Ka-
percent because of a $1.4 down from $7.2 billion, or Buffett’s company gener- sure to the storms would be trina, Rita and Wilma struck
billion insurance underwrit- $2.92 per Class B share. ated revenue of $60.53 bil- limited because it hadn’t the Gulf Coast.
ing loss from Hurricanes Har- Berkshire said that without lion in the period. written much catastrophe CFRA Research analyst
vey, Irma and Maria and its investment and deriva- Berkshire Hathaway ex- insurance in recent years Cathy Seifert said the un-
earthquakes in Mexico. tive gains, which can be ecutives do not routinely because prices were too derwriting losses in Berk-
The Omaha, Nebraska- volatile, its operating earn- discuss quarterly earnings low. shire’s insurance businesses
based conglomerate owns ings were $3.44 billion, or results. But the $3 billion pretax in- drove the quarterly result.q