Waiting on Yellen

Over the past three weeks or so, stocks in the United States basically have been in a holding pattern. The benchmark S&P 500 Index essentially has flatlined of late. Part of the reason for that leveling off is the tentative approach traders are taking to the new Fed Chair nominee, Janet Yellen.

While most observers seem to think that Yellen, who currently serves as Vice Chair of the Federal Reserve, will be a “dove” when it comes to the central bank and the role that it plays in Wall Street’s quantitative easing party, nobody knows for sure what the prospective new Fed chief actually will do.

We’ll get the first glimpse of how Yellen comports herself, and about what she thinks of the current economic situation and the role she plays in the drama, tomorrow when she appears before the Senate Banking Committee for her confirmation hearing. I suspect the fireworks might be interesting, as many members, including outspoken Fed critic Rand Paul (R-KY), likely will be aggressive questioners to say the least.

Meanwhile, the somewhat boring market in the United States has been anything but stagnant overseas. Stocks in the emerging markets, like the ones in the iShares MSCI Emerging Markets (EEM), have been very volatile of late. The chart here of EEM shows the recent decline in this market segment. EEM now trades below both the 50- and 200-day moving averages.

On the interest rate front, we’ve seen a spike higher in bond yields, i.e. a decline in bond prices, as interest rates continue to creep higher. The chart here of the 10-Year Treasury Note Yield shows that the benchmark yield now has broken back above its 50-day moving average.

The bottom line here is that things are still very much in a state of flux when it comes to domestic equities, international equities and interest rates. Until we see some clear signals from Yellen, and until this market reacts in a decisive manner, perhaps the best thing you can do with your money is just sit back and wait on Yellen.