The Fed Weathervane

Another day, another parade of speakers from the U.S. Federal Reserve headed to the podium. While their commentary is increasingly falling on deaf ears for the market, thanks to their seemingly boundless propensity to over-hint and under-deliver during the post-crisis period, not to mention the news competing for the headlines out of Washington, it is arguably more worthwhile than ever to pay close attention to what they are saying now that they are finally backing up their words with actual action on interest rates. With this in mind, it is also important to establish a baseline against which the path of future rate increases may be compared going forward.

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7 To Watch In The Week Ahead

It’s a busy week ahead in policy circles. On Thursday, Republican leaders in the U.S. House of Representatives are planning to bring to the floor a vote on the healthcare bill. And this planned vote will come on the heels of what is sure to be headline-stealing testimony by FBI Director James Comey before the House Intelligence Committee as well as the start of Senate confirmation hearings for Supreme Court nominee Neil Gorsuch, both on Monday. And while all of these events will certainly be interesting to watch, the seven people I will be watching closely in the week ahead are those from the U.S. Federal Reserve that are scheduled to take to the speaking circuit in the coming week.

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Public Enemy Number Zero

The Fed has shifted aggressively in recent days to announce a rate hike on March 15. Part of the reasoning cited for potentially raising interest rates this month is the strengthening job market and inflation rising toward the Fed’s target. While higher interest rates from the Federal Reserve is long overdue, it stands to wonder at this stage of the economic and market cycle whether a shift to a more aggressive tightening schedule may squash the pro-growth momentum for the U.S. economy before it ever gets started.

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There You Go Again

The opinion is virtually unanimous. Growth is accelerating. Inflationary pressures are on the rise. The U.S. Federal Reserve is going to raise interest rates twice if not three times next year after what was interpreted as a more hawkish tone from the Fed on Wednesday. Bonds along with dividend paying stocks are set to take a drubbing as a result. Troubling sentiments indeed for the more conservative investor.  But history is rhyming once again.  Beware the consensus, particularly when it’s laced with hubris.  Be a contrarian.

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Much has been made about the “Trumphoria” that has spread like wildfire across the U.S. stock market. But not all corners of global capital markets have been rejoicing since the outcome of the U.S. presidential election was revealed just over a month ago. In fact, a number of major economies are now facing pressures to their economies thanks to the spillover effects from how some key asset classes have responded to the election results. And if these recent trends continue into the future in the way that some experts are currently proclaiming, we may start hearing about “Trumptagion” spreading across the globe before it’s all said and done.

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