Whether you are a business owner or not, you have your eye on the economy, so you know markets recently have had a rocky time as investors in aggregate reassess prospects for monetary policy stimulus in the US. Is this something to worry about?

The world’s most closely watched central bank unsettled financial markets by flagging that it may start to scale back its bond purchases later this year.

Under this program of so-called “quantitative easing,” the Fed buys $85 billion a month in bonds as a way to keep long-term borrowing costs down and help generate a self-sustaining economic recovery.

What spooked the markets was a comment by Fed Chairman Ben Bernanke on May 22 that the central bank may start to scale back those purchases in coming meetings.

The mere prospect of the monetary system being turned down caused a reassessment of risk, leading to a retreat in developed and emerging economy equity markets, a broad-based rise in bond yields, and a decline in some commodity markets and related currencies.

For the long-term investor, there are a few ways of looking at these developments.

First, we are seeing a classic example of how markets efficiently price in new information. Prior to Bernanke’s remarks, markets might have been positioned to expect a different message than he delivered. They adjusted accordingly.

This is not to make any prediction about the course of the US or global economy. It just tells you that policymakers and investors are reassessing the situation.

Second, for all the people quitting positions in risky assets like stocks or corporate bonds, there are others who see long-term value in those assets at lower prices. The idea that there are more sellers than buyers is just silly.

Third, the rise in bond yields is a signal that the market in aggregate thinks interest rates will soon begin to rise. That is what the market has already priced in. What happens next, we don’t know.

Keep in mind that when the Federal Reserve began its second round of quantitative easing in late 2010, there were dire warnings in an open letter to the central bank from a group of 23 economists about “currency devaluation and inflation.”

Yet, US inflation is now broadly where it was, and the US dollar is higher than when those warnings were issued, suggesting basing an investment strategy around supposedly expert forecasts is not always a good idea.

Finally, keep in mind the volatility is usually most unnerving to those who pay the most attention to the daily noise. Those who take a longer-term, distanced perspective can see these events as just part of the process of markets doing their work.

What individuals can do, with the assistance of a professional advisor, is manage their emotions and remain focused on their long-term, agreed-upon goals.

Defining your goals and managing your emotions has long proven to be effective in attaining your dreams. Feel free to call us to discuss your current strategy and goals.