Total Fixation on Rates Seems To Be The Order Of The Day
By: Tim McPartland,
We are back after a couple days off to ‘recharge’ our batteries. Taking a few days away from the office is always great, but it makes you wonder how long you want to endure the rat race of the daily grind.
Turning on the business news today you can’t get away from the talk of the potential Fed actions (or inaction) on Thursday afternoon. You would think the world was going to end if short rates are moved a tad bit higher. From our observation the global economy is still pretty sickly, regardless of what the FED does and there is no solid economic evidence to mandate a rate hike. Just the same we think the FED wants to get the hike behind them so we can move on. If there is no rate hike we simply move on to more discussion on when the rate hike will occur. It should be a fun end of the week.
As we thought would happen, this week has been relatively quiet in the stocks and bond markets, and this should continue until Thursday mid-day then we think there will be some sort of fireworks in both markets after the FED announcement. Whether it is up or down in stocks and interest rates is anyones guess, but we wouldn’t be surprised to see a knee jerk reaction going one way and then a pivot and move in the other direction as more rational thinking (if such a thing exists) takes over.
On Friday we will be looking to do some buying IF we get a rate increase. Our logic is that if we get a rate increase it will be the only one for a while and we may have a better comfort level that rate sensitive issues will be relatively stable as we move through the balance of the year. If there is no rate hike we will once again have to think through more actions. Our preference is to get invested as a 18% cash position is not highly profitable.