Fed Chair Janet Yellen Weighs in on Brexit Debate

Yesterday, Janet Yellen, Federal Reserve Chair, spoke of Brexit as one of many uncertainties. Her speech followed weak employment data

Richard Whitehall 7 June, 2016 | 3:31PM
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Richard Whitehall: Yesterday, Janet Yellen, Federal Reserve Chair, made an eagerly anticipated speech to the World Affairs Council of Philadelphia. But what did she say and should you change your portfolio?

Federal Reserve are the US equivalent of the UK’s monetary policy committee and set interest rates for the US. They have a dual mandate to keep prices stable and maximum employment.

Broadly Yellen outlined a position which is little changed, noting that interest rates “probably need to rise gradually over time” and that positive forces supporting employment growth should outweigh negative ones.

In the UK many of the media headlines have focused on her reference that Brexit could have significant economic repercussions. However, it should not be missed that Yellen spoke of Brexit as one of many uncertainties. Her speech followed weak employment data announced last week and Yellen made mention of many uncertainties that hang over the interest rate decision, such as demand in the US, demand globally as well as economic challenges in China.

Investors will question whether they should change their portfolio following the speech. They should consider what, if anything has changed? Have their investment goals and limitations changed? Are the prices of financial assets significantly different? Have their expected returns significantly changed? If the answers are no, then it is unlikely that they will need to make changes.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Richard Whitehall

Richard Whitehall  is a portfolio manager for Morningstar Investment Management