Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Reasons to Buy Pre-Owned Luxury Car from a Certified Dealer - 22nd July 19
Stock Market Increasing Technical Weakness - 22nd July 19
What Could The Next Gold Rally Look Like? - 22nd July 19
Stock Markets Setting Up For A Volatility Explosion – Are You Ready? - 22nd July 19
Anatomy of an Impulse Move in Gold and Silver Precious Metals - 22nd July 19
What you Really need to Know about the Stock Market - 22nd July 19
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

The Fed Will Raise U.S. Interest Rates in March 2015

Interest-Rates / US Interest Rates Aug 25, 2014 - 03:02 AM GMT

By: EconMatters

Interest-Rates

March or June?

The big question for financial markets is whether the Fed will raise rates in March or June, it used to be Whether it would be June or September of 2015, and I think as the data gets better in the second half of the year, and QE ends in October, the timeline could be moved up even further, say January of 2015 for the first rate hike.


Read More >>> The Fed Needs to Raise Rates Now! 

Data Dependent creates box for the Fed

For example, what happens to expectations if besides the consistent 200k plus employment reports each month we get a 350k number? What kind of pressure will this put on the Fed to move on rates, especially sense QE has ended in October? I think there is a distinct possibility over the next five months that we have a 350k plus employment report, and the Fed line about changing data and data dependent comes into play. In this case they set the bar for moving sooner or later, and the bar would be surpassed with a 350k employment report.

5.9% or 350k – which comes first?

Also what happens if the unemployment rate drops to 5.9% over the next 4 months, this key psychological rate number being below 6% is real close to approximating full employment by historical standards, and they are still sitting at zero percent in the fed funds rate? The questions and pressure just from their academic peers in the economics community for not addressing this change in data would be immense to say the least from a credibility standpoint.

I would estimate that there is a 40% chance that one of these two data measures in an outsized employment number of 350k plus, and/or a 5.9% reading on the headline unemployment rate comes to fruition that puts considerable pressure of the Fed to move up the first rate hike, or they have some serious explaining to do.

QE Ends in October

Things are going to be completely different when QE ends in October, they can no longer pacify markets with this kind of ‘tightening’ and financial markets are going to start re-pricing all on their own, in a sense telling the Fed where they will be going. This is what markets do, as investors try to front run Central Bank actions. And given how many participants have to switch directions, rates are going to start moving up in the second half of the year on any good economic data in the form of robust GDP reports, 250k plus employmentreports, and a drop in the headline unemployment rate.


Housing & Retail Sales

The second quarter earnings were better than expected, and if housing and retail sales start helping even a little bit, the bond market is going to start pricing in rate rises on the long end of the curve, which is where all the yield chasers have been hiding out. And once some key technical levels are breached to the upside regarding yields, the amount of stop hits and closing of positions is going to add further fuel to the rising yield momentum in the bond market as this is an extremely crowded trade, and they haven`t began to lose money off of very low yield levels. Once bond managers start to lose money in their portfolios as technical levels of resistance fail, selling begets more selling in these bond funds, and a 3% 10-year yield is here sooner than many complacent investors realize.

Re-pricing of Bond Markets


Therefore, watch for above trend economic data that comes out over the next four months; this is the key driver for forcing the Fed`s hand on ‘data dependent’ rate hikes. And if the economic data continues to move in the direction that it is currently moving I expect the Fed to raise rates by March of 2015, and this date isn`t currently priced into the bond market.

Yield becomes a Four Letter Word

The future fund flows out of the bond market, especially at the long end of the curve over the next four months as the economic data comes in hotter each month, given the size of portfolio reallocation, is going to be staggering to watch as the realization that the Fed has to move on rates by March, and not June of 2015. Savvy investors can piggy back on this market dislocation when ‘Yield’ becomes a euphemism for ‘Sell’, as anything even remotely resembling a yield play will be sold with a vengeance over the next four to six months as the rate hike cycle begins in the United States.

Read More >>> Bond Kings to be Dethroned in Second Half of the Year

By EconMatters

http://www.econmatters.com/

The theory of quantum mechanics and Einstein’s theory of relativity (E=mc2) have taught us that matter (yin) and energy (yang) are inter-related and interdependent. This interconnectness of all things is the essense of the concept “yin-yang”, and Einstein’s fundamental equation: matter equals energy. The same theories may be applied to equities and commodity markets.

All things within the markets and macro-economy undergo constant change and transformation, and everything is interconnected. That’s why here at Economic Forecasts & Opinions, we focus on identifying the fundamental theories of cause and effect in the markets to help you achieve a great continuum of portfolio yin-yang equilibrium.

That's why, with a team of analysts, we at EconMatters focus on identifying the fundamental theories of cause and effect in the financial markets that matters to your portfolio.

© 2014 Copyright EconMatters - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

EconMatters Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules