June 19, 2017

Fed may keep Interest Rates at a high level for a while

The three major indexes ended mixed for last week, with the S&P and Dow pulling in weekly gains and the Nasdaq falling slightly. Stock funds also pulled in $24.6 billion last week, the most since President Donald Trump won the election. About four stocks advanced for every three decliners at the New York Stock Exchange. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 10.4.

A risk that the market appears to be ignoring is the risk of Interest Rates. According to Doug Kass ,

"The Fed is tightening, and for the third time in 18 months has increased rates, which it did yesterday. Few will remember Edson Gould's rule of thumb of " three steps and a stumble," which states that stocks may fall after the Federal Reserve raises rates three times in a row without a decrease, according to the Market's Technician Association. The idea is three increases show the Fed is serious about keeping rates at a relatively high level for a significant length of time. As previously discussed, the Fed's monetary largesse has depressed volatility and has provided a friendly backdrop for the elevation of stocks. This monetary setting is now changing."

via thestreet