Will the Fed Miss Its Rate-Hike 'Window'?

If the Fed misses this rate-hike 'window,' chances are, there's another one right around the corner

Nov 13, 2015 at 9:51 AM
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    Newsflash: It's been a somewhat ugly week for stocks so far. The most logical cause is that after six weeks of rallying, it's not beyond the realm of possibility that we just naturally pause a bit. I mean, we're not exactly talking a crash here -- unless 3% is now a crash.

    But alas, we need drivers for every move. And thank goodness we have our never-ending Fed speculation for that:

    "U.S. stocks skidded on Thursday, with the Dow industrials logging a triple-digit loss in early trade as oil prices slumped and speculation grew that the Federal Reserve will raise interest rates next month...

    "'With the earnings season over, markets are focusing on macroeconomic trends, specifically on whether or not the Federal Reserve will increase interest rates in December as the Fed Funds futures suggest,' said Michael Arone, chief investment strategist at State Street Global Advisors' US Intermediary Business."

    Something like 38 Fed governors spoke yesterday. I know that number sounds high, so maybe they each spoke five times. The theme was constant, though -- rates are going to rise. Wahoo!

    It reminds me of many moons ago when we obsessed over the Fed. And then the Fed didn't hike and every pundit got on TV and said the Fed missed their window to hike. Thank goodness that window has apparently re-opened.  

    Wait, I'm checking my notes. Those "window" comments were from all the way back in September. Remind me again how that's possibly a coherent thought on the topic? If they can still hike so close to the supposed "window," then perhaps the window was a bit longer than advertised. If in fact the economy tanked right after the September meeting, then why was missing the supposed "window" at all relevant? If anything, it suggests they made the correct decision not to raise.

    I bring this up because I just saw some guest on TV talk about how the Fed missed the September window, and now they have another one and they better act because ... I have no idea why. I'm pretty sure another window will open up.

    That's not to suggest I think they shouldn't hike, or that I have an opinion on this that's worth listening to. I don't. Frankly, I don't think it's the biggest deal in history; I only ponder the topic to the extent that it impacts short-term market direction. If in fact we're a little weak here because it's "rate hike speculation" week, it suggests to me the actual rate hike will beget a short-term rally. The market right now is overwhelmingly expecting a rate hike in December.

    It's a whole lot of nonsense, but it's nonsense that moves markets. So, we have no choice but to pay attention to it.

    Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.


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