Major averages rose Friday on lower volume. The Federal Reserve decides this coming Thursday whether or not to raise interest rates. Economic data show potentially enough evidence to warrant a rate hike, but the global economy remains in a quagmire. Chairperson Yellen of the Fed is a notorious dove thus she is likely to err on the side of caution and keep rates unchanged for at least another meeting or two. Of course, the should the global economy continue to drag, she may not hike rates until there is sufficient evidence that the major economies are on the mend. This could delay a rate hike until sometime in 2016. Of course, each time the Fed postpones a rate hike, the market expectations of a rate hike increase which can be a drag on the US markets. Furthermore, China could easily retest recent lows which would also put downward pressure on the US markets.
Nevertheless, the Fed may hike rates one time to keep up appearances as they are a political body, then relax rates once again. They did this in 1936 when the US was deleveraging a long term debt cycle. They hiked the discount rate by 0.5% in 1936 then eased until 1940. They could repeat this action again, hiking once, then easing by way of renewed QE, or QE4.
CME futures put the odds of a rate hike at 23% when the Fed meets this Thursday and 37% when they meet in October.
This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2018 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.