I doubt it. I also think the ones from last year were too fast, so it wouldn't surprise me if they took off 0.25% again.
We're stuck in a situation where the bond market is telling us to expect really low growth at 2-3%/year while the equity market is telling us to expect growth at 15%+/year. Meanwhile, cash(*) is paying 2.25%/year. It comes down to the Fed model and the chicken and egg problem. The Fed model stipulates that stocks should be high simply because rates are low. This holds during normal times ... but what we have now is a situation where rates are really low and that's hard to reconcile with the idea that stocks should be really high. More likely, something is broken.
Regardless, "big money" (pension funds) are desperate for yield. They will try to find it where they can now that the Fed is no longer willing to give it to them in fear of removing the life-support respirator to the stock market. This optimism meets reality has been driving yield-instruments upwards for the past two years as more and more market participants are putting the puzzle together correctly and realizing that "growth alone" is not going to provide the money.
(*) 1 month CDs.
Fed rate hikes?
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The Old Man
- Posts: 507
- Joined: Sat Jun 30, 2012 5:55 pm
Re: Fed rate hikes?
https://personal.vanguard.com/us/FixedIncomeHome
The CD yield curve is extremely flat: 1-month 2.35%, 1-year 2.45%, 5-year 2.85%, and 10-year 3.15%. There is only a 0.80% delta between 1-month CDs and 10-year CDs. As JLD says, rate hikes would appear to be unlikely in such an environment.
The CD yield curve is extremely flat: 1-month 2.35%, 1-year 2.45%, 5-year 2.85%, and 10-year 3.15%. There is only a 0.80% delta between 1-month CDs and 10-year CDs. As JLD says, rate hikes would appear to be unlikely in such an environment.
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IlliniDave
- Posts: 3886
- Joined: Wed Apr 02, 2014 7:46 pm
Re: Fed rate hikes?
I tend to agree with this. No comment one way or the other on the investment side of it, but it seems like they were a bit overzealous to blunt the first tentative signs of increased economic growth. Inflation fears maybe?
I have no interest in seeing a crash. Although I can navigate through one myself, many people are just now experiencing the closest thing to "good times" they've experienced in 12 years (or ever for many younger folks). I'd hate to see the rug pulled out from under them deliberately, which we're on the cusp of.