Thoughts {09.21.16}

Good Morning:

Markets are in "wait and see mode" until after the Federal Reserve announces its decision on whether to raise interest rates or not today.  Markets are trading higher on news out of Japan last night where the Bank of Japan announced further policies to boost inflation.  However, that is nothing more than the preliminary bout for the main show out of the Federal Reserve later today.

Wall Street consensus is that there will be no increase today but language indicating a higher probability of an increase in December.  That's the next meeting for the Federal Reserve.   Markets have the potential to react negatively today if we see an unexpected rate increase, particularly if we get indications that we might see another one of these in December.  I think the economy can deal with increases now and at the end of the year but not sure the stock market is prepared to deal with that short term.

Markets have been locked into a roughly 1% trading range for about the last two weeks.  It will be interesting to see if todays announcement is enough to trade us out of that.  

Nobody had a worse day yesterday than Wells Fargo's Chairman John Stumpf.  The worse sort of scandal an institution can find itself embroiled in are the ones that John Q. Public can understand.  Under that standard Wells Fargo is embroiled in a doozy.  It has been alleged that  certain employees of the bank secretly created millions of unauthorized bank and credit card accounts--without their customers knowing about it.    Mr.  Stumpf was called on the carpet yesterday and was grilled by the Senate Banking Committee.  It was a bipartisan affair as both Republicans and Democrats took turns lashing out at both the bank and Mr. Stumpf.   None, however, went after him with the sharp stiletto that was reserved for Massachusetts Senator Elizabeth Warren.  Sen.  Warren accused Mr. Stumpf of "gutless leadership" and ripped into him on everything from what he was paid to whether anybody in the upper tier of management was fired.  However, she saved her broadest salvo for the end of her allowed time: 

"Here's what really gets me about this, Mr. Stumpf.  If one of your tellers took a handful of $20 bills out of the crash drawer, they'd probably be looking at criminal charges for theft. They could end up in prison.  But you squeezed your employees to the breaking point so they would cheat customers and you could drive up the value of your stock and put hundreds of millions of dollars in your own pocket.  And when it all blew up, you kept your job, you kept your multi-multimillion-dollar bonuses, and you went on television to blame thousands of $12-an-hour employees who were just trying to meet cross-sell quotas that made you rich.

"This is about accountability. You should resign. You should give back the money that you took while this scam was going on, and you should be criminally investigated by both the Department of Justice and the Securities and Exchange Commission. This just isn't right."

You can search the internet for Elizabeth Warren and John Stumpf but you can see the main part of the exchange here if you're so inclined.

*Wells Fargo is a component of several ETFs we own for clients and in personal accounts.