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.