Tag: interest rates

"Interest Rates Drive Stocks"? See 4 Charts That Tell You the Truth

Posted on by The INO.com Team

By: Elliott Wave International

Robert Prechter's monthly Elliott Wave Theorist once published a ten-part study explaining why traditional financial models failed to foresee the 2007-2009 financial crisis -- and, more importantly, why they are doomed to fail again (and again).

On Thursday (Sept. 17), the Fed decided to keep interest rates unchanged. On Friday, stocks opened down big. But before you join those who blame it on the Fed, please read this excerpt from Prechter's eye-opening study.

***************

Economic theory holds that bonds compete with stocks for investment funds. The higher the income that investors can get from safe bonds, the less attractive is a set rate of dividend payout from stocks; conversely, the less income that investors can get from safe bonds, the more attractive is a set rate of dividend payout from stocks. A statement of this construction appears to be sensible.

And it would be, if it were made in the field of economics. For example, "Rising prices for beef make chicken a more attractive purchase." This statement is simple and true. But in the field of finance such statements fly directly in the face of the evidence.

Figure 3 shows a history of the four biggest stock market declines of the past hundred years. They display routs of 54% to 89%. Continue reading ""Interest Rates Drive Stocks"? See 4 Charts That Tell You the Truth" →

Jobs Report Not Enough to Signal September Liftoff

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Was May's better-than-expected jobs report strong enough to convince the Federal Reserve to start interest rate liftoff in September?

Based on the market's reaction on Friday, the answer sure looks like yes. Yields on long-term U.S. Treasury bonds spiked to their highest levels since last October, and stocks were mostly lower.

But let's not carried away with one number and one report. Certainly the data-paralyzed Fed won't. If we get three solid months of positive economic statistics, then I’ll think there's a chance – albeit a slim one – the Fed will make a move in September. Until then, we'll have to wait and see.

Notice I've already written off next week's Fed meeting as the first interest rate increase. While the minutes of the Fed's April 28-29 monetary policy meeting "did not rule out" the possibility of raising rates at the June meeting, it was "unlikely" that economic data would justify doing so by then. Nothing's happened in the meantime to change that. Continue reading "Jobs Report Not Enough to Signal September Liftoff" →

When Two Women Get Into A Fight, It's Never Pretty

Posted on by The INO.com Team

This morning, Christine Lagarde, the boss of the International Monetary Fund, announced to the world that the Federal Reserve should hold off raising interest rates until 2016. I do not ever remember the head of the IMF ever saying anything like that before.

So the question begets, is she trying to save her own skin by doing a classic political move and pointing the finger at somebody else, in this case Janet Yellen, head of the Federal Reserve?

My advice on this, it's not going to be pretty and the IMF should take care of its own screw-ups (like Greece) before trying to fix the screw-ups in America.

With that said, let's take a look at what's really going on in the marketplace today. I'm going to look at the major indices with the Trade Triangle technology, which by the way is totally nonpartisan and unbiased, and just goes with the flow.

Here's what the Trade Triangle technology is saying right now. Continue reading "When Two Women Get Into A Fight, It's Never Pretty" →

Continued Weak Jobs Numbers Allow the Fed to Sit Tight

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


Was Friday's April jobs number good enough to get the Federal Reserve to start normalizing interest rates soon?

Based on the reaction of both the stock and bond markets, the answer is no. The increase was likely way too small to convince the data-paralyzed Fed that the economy has recovered enough to let it stand on its own feet. The sharp downward revision in the already lousy March figure only added to the case.

The jobs report – nonfarm payrolls rose 223,000 in April – was a lot better than March's report – which isn't saying a whole lot – but certainly not strong enough to worry investors that the Fed might see a reason to raise interest rates sooner than most now expect, which is either late this year or early 2016. Continue reading "Continued Weak Jobs Numbers Allow the Fed to Sit Tight" →

Fed Has Plenty of Excuses Not To Do Anything Soon

Posted on by George Yacik

George Yacik - INO.com Contributor - Fed & Interest Rates


If you're among the vanishing minority of people who still think the Federal Reserve is going to start raising interest rates in June, the latest reports on the U.S. economy and events in Europe and China should disabuse you of that farfetched notion.

The proportion of economists predicting the Fed will wait until September to raise rates rose to 70% in an April 3-9 survey, more than double the figure from the previous month. That ratio has likely gotten even wider following the news of the past week, although I think it will be well after September before the Fed starts "normalizing" monetary policy.

Let's look at the U.S. economy first, where indicators continue to come in soft. Continue reading "Fed Has Plenty of Excuses Not To Do Anything Soon" →