Apr 2, 2014 4 min read

If you’ve been wondering why your savings account hasn’t been yielding interest for the past several years, Jeff Rosenberg says you need look no further than the Federal Reserve Bank for the answer.

Rosenberg, who is chief investment management strategist for the investment firm BlackRock, was the featured speaker Wednesday at Southpointe Golf Club. He manages $1.3 trillion in bonds.

In an hour-long presentation, Rosenberg explained to an audience of business professionals invited by Southpointe-based Strope Financial Group and UBS Financial Services how the Fed’s monetary policy of the past several years has negatively impacted Americans’ savings, while at the same time pushing up the value of assets like stocks, bonds and homes.

“They’re almost done; they’ve done as much as they can do,” Rosenberg said, explaining the central bank’s strategy of printing money and keeping interest rates at zero and inflation at bay.

While that plan pushed up the S&P equity index 200 percent over the past five years and raised housing prices 15 percent since the Great Recession of 2008, it has fallen short of encouraging Americans to spend more and ramp up economic growth, Rosenberg said.

With consumer spending representing about two-thirds of the U.S. economy, the weak spending response is a problem, he added.

Because Americans aren’t spending, businesses are reluctant to borrow to expand or to give raises, something that’s familiar to most people who have been lucky enough to hold onto their jobs in the aftermath of the recession.

The Fed accomplished growth in Americans’ asset values, but its policy has come at the expense of the consumer, and by extension, the performance of the overall economy, Rosenberg added.

This far along in a recovery, he said, economic growth should be between 6 and 8 percent, but is averaging only around 2 percent.

“The Fed can’t force you to spend because it can’t force your employer to pay you more money,” he said.

But Rosenberg said with Fed Chairman Janet Yellen’s comments last week the central bank would finish tapering of its quantitative easing in about six months, it appears that the Fed will slowly begin to change its long-term strategy and begin to let interest rates slowly rise, probably by the middle of 2015.

But it remains to be seen whether the new strategy will be kind to investors.

He noted the central bank has a mixed track record when it comes to the practice of tightening its fiscal policy.

He noted when it tightened policy in 1999 to 2000, it caused the tech stock bubble to burst.

While Rosenberg is “a bond guy,” he said he’s bullish on stocks, at least until the middle of next year, but with a caveat.

“Be careful about taking too much risk, because 2014 is a transition year,” he said.

In response to questions about bonds, particularly municipal issues, Rosenberg also suggested some caution, particularly about investments in some municipalities, especially those with large pension obligations.

He named Stockton, Calif., and Detroit as places where bondholders are at risk of being subordinated to municipalities’ need to take care of pension holders because of politics.

“Being a bondholder in a municipal government with a high pension obligation means you have to expect less,” he said.