Friday, September 18, 2015

Redmount’s brief opinion on the Federal Reserve’s (Fed) decision to not move on rates

We think it probably won’t do anything good for markets
  • Attention will now simply shift to “will they/won’t they” for their October meeting.
  • There had been expectations for a “one and done” increase of 0.25%, but that became more and more unlikely given the market tabulations.
  • That said, an increase to the fed funds rate of 0.25% would be a rational response to the probably very slow profile of rate rises over the next 12 to 18 months.
  • Initial rate rises have typically been followed by continued equity market performance on average while the final ones usually brought economic contraction and earnings recessions resulting in stock market losses.
  • And that’s what we’re concerned about, earnings trends. As history suggests, “don’t be afraid of the first interest rate rise, be afraid of the last one
  •  In general, we remain concerned with market volatilities.