I really need a question answered. Why did Yellen raise rates and announce at least 3 more rate hikes next year?
As I see it there are several potential answers to this question:
1. To slow down an economy that is heating up or read to heat up.
If that is her reason it’s very suspect. The inflation indicators are absent, a record number of people are out of the workforce, major foreign banks are in trouble, the debt problems of some EU countries are still not resolved, tourism is coming to a standstill, geopolitical risks have been increasing, the U.S has a record debt load primarily financed through short-term rates and finally in the U.S sides are being drawn that are coming very close to boycotts by each side.
Now, add to that this tepid recovery is getting very long without a recession and it does not bode well. So I cannot imagine the Fed with all the data they have, that they would actually feel that is the reason for the hikes.
2. Yellen as an appointee of Obama is sympathetic to the “progressive” agenda and there for feels that rate hikes, now that there is a non– “progressive” administration, strategically is the right thing to do for the “progressive” agenda.
I doubt that is the answer. However, Yellen has made statements in the past that you would have to have a bit of concern over coming from the head of the rate-making body that influences the world. Just one that comes to mind this morning is some comments she made about being concerned about wealth inequality around the world and here in the U.S. Now I have that concern also, but it also concerns me that the person in charge of the stability the U.S. financial health and indirectly the world’s financial health would think it is her job to be a “social warrior” There are enough of these types on both sides of the isle we do not need it from the head of the Fed.
Thos are the two reasons that come to mind for me early Friday morning. So tell me, what is the answer. Neither makes much sense as the head of the Fed is supposed to be a neutral arbiter politically with the sole purpose to stabilize the financial system of the country.
In any event, whatever the reason, I feel it’s the wrong one by a long way. Looking over the landscape it could turn out to be disastrous for the U.S and the world.
First, the boycotting by the various interest groups of each other is going to have a disastrous effect on our already fragile economy. The latest is Delta airlines. If you wish to know the details one only needs to google Delta Airlines boycott and you will learn quickly what transpired the last few days. And if you want an analysis of what happened you can watch the video from “Tucker Carleson” Thursday night which discusses it in detail.
The problem is this is not an isolated occurrence and it’s picking up steam. Target, the NFL, ESPN, the upcoming inauguration, are just a few occurrences where this tactic is being employed. And it’s being employed by all not just one group.
My guess is it’s only going to get worse. The rhetoric keeps heating up along with the threats.
Myself, I have no stake in this fight. As an outsider viewing in my take is the U.S. has gone insane with politics. Politics is supposed to be a means to govern for the benefit of the people. Unfortunately, it has lost its way. Politics has polarized the U.S. to the point it’s unrecognizable now.
Enough of my rambling this morning but this backdrop is important to understand why the Fed should not be raising rates. Rather the Fed needs to be ahead of the curve to anticipate that very soon all of these factors I have discussed is going to take its toll.
My guess is with the interest rate hikes around the corner next year, the increasing polarization here in the U.S, and the ever increasing geopolitical risks this bull market is ready for a taste of reality that could come as early as the first half of next year.
Now, many a very intelligent person has failed to attempt to call the end of this bull market:) So, there is no reason to think that a person sitting at home who primarily handicaps sports can call the end to this bull market. So do not panic, but just keep it in the back of your mind when your thinking about going all in investing in the market.
We are about 30 min before the open and the indexes are flat with the only thing I can see of any significance is TLT +.3% and IBB +.32%.
Today I will be looking to add to my positions on any dip. Also on any dip today I will be looking to put on a 1/4 mean reversion trade in SPY. I typically us SSO as my trading vehicle for SPY longs.
If you want to follow some of my trades along with my thoughts typically given after the open you can go to @rickjswings. Typically I talk about the overall day expected with the markets and also give some levels on the ES and NQ for failed breakout scalping.
It’s my private twitter feed for the stock market and its free. Sports Handicapping is the subscription-based part of this site. But considering the cost of joining it’s almost free:)
Good Luck Today
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