We believe this week will be a historic week with events that could impact your portfolio and the rest of the world. We also believe that the weeks ahead and in the month of October will give us much to talk about. We will continue to keep you updated.
High noon at the Fed’s O.K. Corral
We’ve been saying since the beginning of the year that we believe interest rates will not go up. It’s now high noon at the O.K. Corral as we wait for the Fed to show up and tell us what they are going to do.
Reasons the Fed will raise interest rates
The reasons they will raise interest rates are the improving job market, unemployment resting at 5.1%, a strong housing market, rising consumer confidence, strong auto sales, and a recent good GDP report.
Reasons the Fed will not raise interest rates
The reasons they will not raise interest rates are the current international issues, declining energy prices, and lower than expected manufacturing and export numbers. Also weighing heavily is the fact that the International Monetary Fund (IMF) Chief and the World Bank head have asked the Fed not to raise rates. While there is ammunition on both sides of the the table, we still believe they will not raise interest rates.
Failed attempts to raise interest rates
Stanley Fisher, who is second in charge at the Fed, has the philosophy to go ahead and raise interest rates because no one really knows the affect until after the fact. He believes waiting could be worse. When Fisher did this as the head of the Bank of Israel, they had to roll back the increase a year later. Many other banks around the world have tried to raise their rates and could not sustain it. Since 2008, it has become impossible during the current economic condition for any bank to sustain raising interest rates.
Standing by our predictions
We’ve been saying since the beginning of the year that the Fed would not raise interest rates. We also said the Fed would be fighting deflation and that has come about. In February of this year we said that oil could go as low as $20 per barrel. Last week, other financial analysts were saying they were surprised that is now a possibility.
Heated political debates causing market volatility
We have also said in past videos that politics are going to get nasty and cause more volatility in the markets. We believe there is a possibility that Speaker of the House, John Boehner, could be voted out of that position causing more political conflict. The Iran issue, the debt ceiling, and the highway funding bill issues are also causing a lot of heated debate in Washington. When fiscal policy becomes a heated debate, people lose confidence in the leadership of the country. Then people start to question the stability of their job and the economy. This is why we still believe we could see more volatility in the markets.
Please send us your comments and questions or call us if you would like to discuss your current investments in light of this information.
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Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in the presentation may not develop as predicted
Stock investing involves risk including potential loss of principal.