Forward guidance should limit damage to equities

Livewire News

Livewire

“Initially after a rate hike, markets tend to sell off in a moderate fashion and then bounce back, especially when rates rise from very low levels. In thirteen of the last sixteen rate hikes, the market took a dip in the immediately preceding six months. This scenario represents the conditions facing our current market. It is important to distinguish between a rate hike when the market is expecting it, and one where the market is wholly unprepared. The Fed has stated it will raise rates, and a rate hike in the near to medium term should surprise no one. As the Fed wound down QE, it used forward guidance to limit surprises and manage market reactions. The same process is being used to broadcast a rate hike in the near future very clearly and carefully, which should limit the overall potential damage to equities. However… equity valuations are no longer cheap, which means investors must be more selective than they were a few years ago.” (VIEW LINK)


Livewire News
Livewire News
Livewire

Livewire News brings you a wide range of financial insights with a focus on Global Macro, Fixed Income, Currencies and Commodities.

Expertise

No areas of expertise

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.

Comments

Sign In or Join Free to comment