The Fed Makes Its Move

The Fed Makes Its Move

Wall Street rallies as interest rates rise for the first time since 2006.

Provided by Jeff L. Holland, CLU, ChFC & Cory A. Samsil, CRPS

Interest Rates Are Up

U.S. monetary policy officially changed course Wednesday. Federal Reserve officials voted to raise the federal funds rate by a quarter of a percentage point, ending an unprecedented 7-year period in which it was held near zero. Nearly ten years had passed since the central bank had adjusted interest rates upward.1


The Federal Open Market Committee voted 10-0 in favor of the rate hike. It also raised the discount rate by a quarter-point to 1.0%.1


Addressing the media after the FOMC announcement, Federal Reserve chair Janet Yellen shared the central bank’s viewpoint: “With the economy performing well, and expected to continue to do so, the committee judged that a modest increase in the federal funds rate target is now appropriate, recognizing that even after this increase, monetary policy remains accommodative.”2


Equities started the day with minor gains, then advanced further. The Dow Jones Industrial Average, S&P 500, and Nasdaq Composite respectively advanced 1.28%, 1.45%, and 1.52% Wednesday. The yield on the 2-year Treasury hit a 5-year high of 1.021%. Gold rose $15.20 to close at $1,076.80 on the COMEX.3,4


As a December rate increase was widely expected, the real curiosity concerned the following press conference. Would Janet Yellen offer any hints about monetary policy in 2016?


She offered one: she said she doubted that any interest rate hikes in 2016 would be “equally spaced.” Aside from that remark, no new insights emerged; Yellen reemphasized that the Fed does not plan to raise rates aggressively.2


Investors gained more insight from the Fed’s latest dot-plot chart, which expresses the Federal Open Market Committee’s opinion on where the benchmark interest rate will be at near-term intervals. The new dot-plot forecasts four rate hikes during 2016, with the federal funds rate climbing toward 1.5% by the end of next year (the median projection is 1.4%).5


The dot-plot revealed benchmark interest rate targets of 2.4% for the end of 2017 and 3.3% for the end of 2018, slightly lower than the previously stated targets of 2.6% and 3.4%.5


That corresponds with the consensus of analysts surveyed by CNBC. Their expectation was for three quarter-point rate hikes across 2016, taking the federal funds rate toward 1%.6


Some analysts wonder if the next rate hike might occur at the FOMC’s March meeting. Nothing could be gleaned about that from Yellen’s press conference or the new FOMC announcement.6


With more tightening seemingly ahead, what is in store for the bull market? Bears may want to wait before making any gloomy pronouncements. While rising interest rates are commonly assumed to impede a bull market, this is not always the case. In fact, the S&P 500 advanced 15% during the last round of tightening (2004-06).7


Could higher interest rates decrease inflation pressure? That is a distinct possibility, and that would hurt wage growth and business growth. The Fed would like to see inflation in the vicinity of 2%, yet the Consumer Price Index is up only 0.5% in the past 12 months, held in check by a 14.7% annualized retreat in energy prices and a 24.1% annualized fall in gas prices. On the other hand, the Core CPI (minus food and energy prices) is up 2.0% in the past year.6


The Fed may have made just the right move at the right time. If it had waited until 2016 to tighten, a collective “uh-oh” might have been heard from pundits and analysts, with comments along the lines of “Does the Fed know something about the economy that we do not?”


As JPMorgan Private Bank chief U.S. investment strategist Kate Moore told CNNMoney this week, “Keeping interest rates at zero is enforcing the idea that the U.S. economy is fragile.” Years of easing certainly helped the bull market, though: Wednesday morning, the S&P 500 was 202% above its March 9, 2009 bear market low.2,7


Ultimately, the central bank felt the time had come for tightening. At Wednesday’s press conference, Yellen commented that data had led the Fed to raise rates – it had not made its move in response to any shifts in public opinion. “Consumers are in much healthier financial condition” than they once were, she remarked. The rate hike certainly expresses confidence in the economy, which could strengthen further in 2016.2

*This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.



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ADA Mistakes: Avoid the 10 Common


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The ADA Amendments Act of 2008 broadened the definition of disability previously established by the ADA and effectively expanded the group of people who would qualify as disabled. The amendments put more pressure on employers to provide reasonable accommodations and created more potential liability for companies that are not in careful observance of the law. This article provides helpful guidance for employers to follow, as well as common mistakes to avoid.

What Employers Can Do

There are steps employers can take to protect themselves from liability and prepare their company in case of a future lawsuit.

  • Keep Job Descriptions Detailed and Accurate. It is important that job descriptions are kept up to date and always include essential functions of a job. Remember that employers have a responsibility to at least attempt to reasonably accommodate an employee who cannot perform an essential function. Essential functions in a job description can be one factor in legally proving that the task is indeed essential to the job; these functions can include physical requirements like lifting or standing and stamina requirements like working long hours or weeks.
  • Develop an Accommodation Policy. Creating and distributing a reasonable accommodation policy can demonstrate your commitment to honoring the ADA. The policy should direct all reasonable accommodation requests to HR rather than to supervisors, as HR professionals are better equipped to deal with the nuances and legal risks of handling such a request.
  • Train Supervisors. Even though you direct employees to HR, supervisors still need to know how to handle the situation if a reasonable accommodation is requested of them. They should not respond either yes or no to the request, regardless of how feasible it may or may not be, but should instead refer the situation to HR. In addition, supervisors must be trained to handle potential ADA situations that may arise during a job interview or in their daily work with employees.


Employers have specific responsibilities under the ADA; failure to adhere to these responsibilities can result in lawsuits and significant penalties. There are steps employers can take to protect themselves from liability and avoid common ADA mistakes.


Common ADA Mistakes

In navigating ADA, HR professionals should be careful to avoid these common mistakes.

  1. Ending accommodation dialogue with an employee if no reasonable accommodation can be found to help the employee perform an essential job function. In this situation, employers should consider other accommodations such as working part time, reassigning the employee or providing an unpaid leave of absence.
  2. Taking a manager’s word that a function is, in fact, essential. This will be contested if the issue goes to court, so employers should investigate themselves to determine whether a function in question is essential or not.
  3. Using the “undue hardship” provision too liberally. For instance, reasons such as cost or other employees’ reactions will generally not be accepted by the court as an undue hardship for providing a reasonable accommodation.
  4. Discussing details of a disability with the employee’s manager. The manager should generally only know the nature of the accommodation being provided. An exception is if the disability affects how the manager will interact with the employee, such as a hearing impairment.
  5. Failing to consider other laws applicable to an employee’s disability. For instance, a disability under the ADA often also qualifies as a serious health condition under FMLA, so FMLA laws and provisions might come into play.
  6. Rejecting an employee’s request because it seems unreasonable or impractical. Employers should still engage in a dialogue with the employee to see if a solution can be reached. Even if you still determine that the request is not feasible, it is important to follow the full process to reach that decision (and document it completely).
  7. Eliminating essential functions as an accommodation, even for a limited period. Though sometimes this is a feasible solution, it can also make it harder to argue later that the function is essential for this or any employee. In addition, other employees may argue that the function should not be essential for them either, or claim discrimination. To do this safely, emphasize that suspending or relaxing the essential function is temporary and document the specific reasons for this action to avoid discrimination claims from other employees.
  8. Failing to properly document a denied accommodation request. Documenting the process followed and the reason for denial will help your defense in the event of litigation.
  9. Taking performance into account when deciding if an accommodation is reasonable. All workers should be treated the same in this process, whether high performers or underachievers.
  10. Not considering reasonable accommodations just because the employee doesn’t offer any specific ideas. If an employee tells HR that he or she needs an accommodation, it is the employer’s responsibility to investigate potential accommodations.


Now more than ever, the burden has shifted to employers to provide reasonable accommodations when possible and show care in handling disability-related issues in the workplace. It is important that you are familiar with the nuances of the ADA and the ADA Amendments Act to keep your company in compliance and avoid costly lawsuits and penalties.




This HR Insights is not intended to be exhaustive nor should any discussion or opinions be construed as professional advice.
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