The Daily Dow
Tuesday, May 20, 1997
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (May 20, 1997) -- The Fed Watch is over, at least for two months. In one of the least predictable Open Market Committee meetings in recent memory, the Federal Reserve opted to leave interest rates alone. The stock and bond markets were cheered by the news, of course, and a generally negative tone to the day's trading turned around immediately.

The big winners on the news today were financial stocks, which are tied closely to interest rates, obviously. (Perhaps the real winners are all those homeowners sitting on variable-rate mortgages, who were facing another slice out of their monthly budgets if interest rates had been boosted.)

The question the short-term traders will immediately focus on now that we're past this meeting is whether the Fed has decided not to raise rates because the economy seems to be slowing a bit, or whether they're just biding their time until the July meeting. It gives us lots to talk about, even though it means relatively little to us as long-term investors.

If the Fed had raised rates today, would you have sold your Dow Approach stocks? Probably not (at least we hope not). So, it's a story to fill up some pages, and interest rates are indeed important to us as stock investors, but we don't make our investment decisions based on the Fed or other macro-economic events. The Dow Approach ship is built with an eye to weathering storms and cruising through calm seas equally smoothly. That allows us to go where we want at any time and takes indecision out of the process.

For now, let's enjoy the results of another good earnings season, low inflation, decent growth, and moderate interest rates. It's hard to ask for much more, isn't it? Fool on!

(c) Copyright 1997, The Motley Fool. All rights reserved. This material is for personal use only. Republication and redissemination, including posting to news groups, is expressly prohibited without the prior written consent of The Motley Fool. ________________________________

Stock  Change   Last
--------------------
T    +   7/8   34.25
GM   +1  1/2   57.38
CHV  -   1/2   70.13
MMM  +   3/8   91.75

               Day   Month    Year
        FOOL-4   +1.36%   2.65%  -1.95%
        DJIA     +1.03%   4.20%  13.26%
        S&P 500  +1.01%   5.03%  13.62%
        NASDAQ   +1.69%   8.18%   5.64%

    Rec'd   #  Security     In At       Now    Change
   1/2/97  120 3M            83.00     91.75    10.54%
   1/2/97  153 Chevron       65.00     70.13     7.88%
   1/2/97  179 Gen. Motor    55.75     57.38     2.91%
   1/2/97  479 AT&T          41.75     34.25   -17.96%


    Rec'd   #  Security     In At     Value    Change
   1/2/97  120 3M          9960.00  11010.00  $1050.00
   1/2/97  153 Chevron     9945.00  10729.13   $784.13
   1/2/97  179 Gen. Motor  9979.25  10270.13   $290.88
   1/2/97  479 AT&T       19998.25  16405.75 -$3592.50


                             CASH    $609.53
                            TOTAL  $49024.53