Technical & Fundamental Oil Reports Specialists

Follow us

Bring on an interest rate increase!

Published Thursday, November 19th, 2015

The Fed minutes released yesterday point strongly to a December interest rate increase and the US stock market gave it the thumbs up. There are no longer any fears apparently that it will be a drag on US growth or trigger an emerging market meltdown. It is easy to forget how chameleon-like stock markets are. Last month’s bad news is this month’s good news; all you have to do is adapt the story and add some colour. Memories are short and investors gullible.

The adapted story is that a rate increase will show that the Fed has confidence in the US recovery and a failure to raise the rate would therefore be negative. Given that Fed forecasts and guidance have proven to be inaccurate it is strange that the market would have confidence in a Fed rate rise decision. Perhaps those who drove the market higher yesterday do not believe this, but believe enough investors will that it is worth buying now to sell into a late year rally.

The prospect of a more certain interest rate outlook may also have helped as did a strong buy recommendation from Goldman on Apple which rose 3.2%. The European stock market mood was much less bouncy and the main news was that Germany sold two year debt at a record low yield of minus 0.38% in a clear sign that Marco Draghi is expected to deliver further stimulus in early December. The S&P closed +1.62% and the Eurofirst 300 lost 0.2%. The French CAC fell 0.6%.

to read the rest of the report, please click here

Posted by David Hufton