Rate Hike? Not So Soon…

In the hours between when the market closed on Tuesday night and about 2:00 yesterday afternoon, the Dow gained 125 points. Then, in the space of only 15 minutes it shed every single of those gains. But not even an hour later, the market slowly started chugging higher once again. By the time the closing bell rang, the Dow finished up the day with all its original gains intact (and then some).

Confusing? Not if you were paying attention to the news.

Yep, you guessed it. There was another announcement from the Federal Open Market Committee (FOMC) at 2:00 pm yesterday.

What was the most interesting bit of news to come out of this month’s meeting? Well, it seems an interest rate hike might finally be on the table for December. Now, that’s not just what the futures market chose to believe as rates futures contracts upped the chance of a move this year to 47%.

The Fed itself seems to think we’re approaching their overall goal of 2% inflation. This of course is quite a change from the September meeting where Eurozone woes and a Chinese meltdown threatened the entire world’s economy. Instead, yesterday the Fed said we’ve made it through the danger zone. Well, congratulations to us! Now, the members of the FOMC simply want to be “reasonably confident” inflation is actually going to rise before they finally raise rates, which could happen as soon as December.

Of course, some hawks in the Fed would have preferred the rate hike to have happened already. And Janet Yellen herself has gone on the record saying she thinks the economy could support a rate hike before the end of this year.

Am I worried about any of this? Not yet; if the Fed follows through with its talk of a December hike, I believe it’ll be a one-and-done deal. The Fed may lift the federal funds rate to 0.25%, but overwhelming political pressure at home and abroad will keep it from raising rates further.

However, as a smart investor, I’ll keep my eye on the factors the Fed considers important. That includes today’s fall economic growth estimate and next week’s jobs report. If rates do rise this year, putting pressure on American businesses, I’ll reevaluate my holdings then. Until that moment, however, I suggest you stay up-to-date with the stocks you own by keeping an eye on them with the help of my Portfolio Gradertool.


Louis Navellier

Louis Navellier

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