Friends
As expected, the Fed raised the Fed Funds rate today a quarter of a point. The range is now .75% to 1% with the target now at .875%. The statement itself was a bit more hawkish but the path to future rate hikes appears to be about as expected. The Fed now sees two more rate hikes this year, 3 more in 2018 and then 3 to 4 more in 2019. That would take the Fed Funds rate near 3% by 2019. Interestingly, in the market place, bond yields fell as prices rose. So as the Fed commits to higher rates, the bond market itself is not convinced yet of vital economic growth and/or runaway inflation.
On the other hand, stocks which have been quiet lately, seemed quite comfortable with the rate hike as it had been expected. By the close, the Dow Jones Industrial Average was up 112 points to finish the day at 20,950. The S&P 500 was up 19 points to close at 2,385. Gold was up $15 to trade at $1,217 per ounce, while oil was up $1.13 to trade at $48.85 per barrel WTI.
What is the takeaway from today’s proceedings? It appears that the Federal Reserve is comfortable with the pace of growth of the economy at this point. It appears that employment should continue to improve, and inflation should remain controlled. Remember, the central bank desperately wanted some inflation, and now they have it, and it appears that they are comfortable that inflation will not get out of hand. Is this another green light for stocks to forge ahead, or are we a bit extended valuation wise? While the Fed seems comfortable in their assessment of the situation, the stock and bond markets appear to be a bit at odds.
Have a nice evening everyone.
