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The Fed Made Christmas Come Early for Investors

Amazing, isnt it, what a little pixie dust can do?  Wednesday afternoon, at the end of its latest policy-making confab, the Federal Reserve handed the financial markets an early Christmas present.  Just a couple of words, mind you.  But they packed a punch.

For starters, the central bank surprised (and delighted) equity bulls by once again pledging to keep interest rates at rock bottom for a considerable time a phrase thought to mean at least six months more.  Many pundits had expected the Fed to scratch that language in this months post-meeting press release.

As if that wasnt enough, Chairwoman Yellen waved her wand again and sprinkled more stars.  The Fed promised to remain patient before raising rates.

Showered with this double dose of bibbity-bobbity-boo, buyers stepped in and pushed up their bids for stocks.  The S&P 500 soared 40 points Wednesday, then another 48 points Thursday the best back-to-back percentage gain in more than three years.

This is all very good for shareholders, and it suggests that the S&P 500 will break out shortly to a fresh all-time high, perhaps even within the next few sessions.  Santa has indeed come to town, in just the nick of time!

Only one piece of the pretty picture is still missing.  Oil hasnt rallied in any meaningful way.  At a recent quote of $54.82, the January WTI futures contract remains well below its Tuesday settlement of $55.93 a barrel.  So, the two-day spike in the stock market hasnt done a thing for Texas tea.

Crude oil will need to bounce soon, or the rebound in energy stocks will fade.  If you were thinking of tipping more money into energy-related investments, I advise waiting another couple of days to see whether oil can snap out of its funk.  Even if you have to pay a bit more, it will be worth knowing theres some kind of bottom to this seemingly bottomless decline.

Other market sectors (besides energy) have, of course, screamed through the roof in the past two days.  Whenever prices move this fast, I recommend caution with new purchases because profit takers could swoop in at any moment and create some turbulence.

Nonetheless, I think youre still safe accumulating  HSBC Holdings plc (ADR)  (HSBC ).  As of recently, HSBC, the British bank with deep Asian roots, continues to yield a handsome 5.2%.

If Yellen and company are serious about holding interest rates lower for longer in 2015, fat dividends like this one will prove irresistible to retirees and would-be retirees seeking a decent income.  Treasuries just dont cut the mustard! HSBC merits a buy ranking.

Richard Band’s Profitable Investing  advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won nine Best Financial Advisory awards from the Specialized Information Publishers Foundation.

investorplace.com/2014/12/hsbc-fed-oil-sp-500-yellen-energy/.