There was a 100% chance that the fed would raise rates today. The market knew that the rates would be raised today. So the question now is the fed going to raise rates a few times in 2017. Because when interest rates go down the market goes up. And when interest rates go up the market usually goes down, and sometimes crashes.
This is interesting topic. Investors are trying to absorb as much as they can going forward. The market could have been down this week much more, but it seems for the big guys on Wall St. Yellen just did not give them enough juice that they wanted to hear. So it was as small sell off, and nothing more than that. Investors are now focused on next year.
If Janet Yellen was to come out and tell investors she is willing to hold rates lower for longer, that would indeed spike the market back up. But with Donald Trump now as president, he is more inclined to shift the economy into an interest rate rallying type environment.
The real take away from 2016, is that Janet Yellen blatantly came out and said she is going to start hiking the interest rates are 0.25% increments next year, and possibly she will do it several times until we get to 3%. If that actually does occur, maybe this bull market party that started back in 2009, is soon going to come to an end.
Going into the end of year, There is always the notion that a Santa Clause rally is in play, and we have already seen the market rally quit extensively. Maybe the best play shorter term is to buy the dips going into New Years Eve?
The market has hardly seen a red day in the last several months in 2016 as we head into 2017. So a dip or sell off here is not only much needed, it was overdue.
Despite what the Fed is saying about the future, there is a stern feeling on Wall Street that growth in the GDP and Inflation is going to go higher. Many smart analysts think that under a Donald Trump Presidency, this would occur even faster. So it’s something to think about over the next 4 years as Donald Trump will reign.
A lot of people on Wall St. think that Donald Trump winning the US elections has bought with it hopes that the fiscal loosening he keeps talking about and his policy that he will spend on infrastructure will spur much growth in the US, and the economy. We have to remember that the stock market has posted a powerful rally during the post-election period and government bond yields have also experienced a nice rally.
The Atlanta Fed now believes fourth-quarter growth will show at 2.4 percent, down from 2.6 percent last week, and many other economists also think inflation is a real risk going forward if Janet Yellen and the Fed start to raise interest rates.
The Fed took the rates to zero during the financial crisis in 2008. That is a pretty silly move, as now they have nowhere to go but up! If the chickens are coming home to roost that might be very bad news for the market in 2017. Time will tell.