Technical & Fundamental Oil Reports Specialists

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The Fed is for turning

Published Monday, September 28th, 2015

We commented in Friday’s report that there is simply no good news. We were wrong and boy don’t the markets lap up anything that is positive. One piece of good news amongst a plethora of bad has a huge impact. It is easy to underestimate the power of hope and therefore the bias of markets towards moving up rather than down. The problem is that the news that 2Q US GDP growth was 3.9% rather than 3.7% is historic. The 3Q number will be lower and who knows for 4Q.

The stock markets are having a bout of memory loss. Early stage stock market dementia perhaps, which economic historians will be telling us in due course was a sure sign of a market in trouble and close to collapse. Investors have forgotten that a Fed interest rate delay is positive for equities or at least that is what they have been interpreting it as for the last five years. Last week the Fed announcement of a delay was greeted negatively and Janet Yellen’s back peddling on Thursday assuring listeners that a rate increase this year is very much on the cards was greeted with relief.

The President of the Fed in effect back pedalled on her back pedal. This lady and her colleagues are definitely for turning. She is spinning so much that she was not able to complete her speech on Thursday because, we are told, of dehydration. Or was it perhaps pressure in the face of the enormity of the decision with advice and warnings pouring in from every direction. The net result is that uncertainty is the victor. Caution and hesitation are close neighbours but caution is respected and hesitation ridiculed. The Fed and Mrs Yellen’s presidential tenancy are flirting with ridicule which is a disaster for market confidence.

to read the rest of the report, please click here

Posted by David Hufton