This is a short week with a countdown to an eventful time. China this morning voiced they are putting in circuit breakers on their stock market, which is long over due. Still, the big discussion is the Federal Reserve raising interest rates, but they may not have to raise rates at all. The Fed has caused market volatility by being vague about what they will do. They could be doing this to help the market correct itself. Whatever the case, we still don’t believe the Fed will raise rates as it would have a big negative impact on other countries.
How China could raise interest rates for the Fed
China has stated they are going to intervene in their markets by throwing in liquidity. To do this they will have to liquidate the millions of dollars of U.S. Treasuries they hold. This will put supply into the markets and raises our interest rates, doing the Fed’s job for them. So when people hear on TV that China will one day own the United States, they can rest assured that China is having to sell off much of what they own in the U.S. right now to take care of themselves.
What else could impact the Fed’s decision?
We hear of many people wanting to buy into energy stocks but we clearly see that commodities are in a bear market. Real Estate has also entered into a bear market. Both of these situations could impact the Fed’s decision to raise interest rates.
What’s the big deal about the Fed?
The Fed has said if they do raise rates, it will be small and slow. While this doesn’t seem like it would have a big impact, it is causing fear and uncertainty. This uncertainty, along with the China issue, is what is really causing all the volatility in the markets. We may get a hint of what will happen with the Fed when the Minneapolis Fed Chair speaks later today.
More volatility to come
When Congress goes back into session, it could get real nasty. Congress has to deal with raising the debt ceiling, the highway funding bill, and the Iranian deal which will cause more volatility in the markets. Because of these issues, we see the volatility continuing through September and October.
Weathering this market volatility
To maneuver our clients through this market volatility, we have taken a larger cash position in our portfolios. While our clients’ statements are just snapshots of their portfolio, our clients have the ability to look at their valuations on an ongoing basis through our online Account View. Client’s can access their Account View here. Clients can see the moves we have made and the over value of their accounts 24/7. Our investors have the ability to see the big picture with Account View and not be handcuffed to one moment in time.
If you want to talk about your portfolio, don’t hesitate to call us at (205) 989-3498.
[contact-form-7 id=”4653″ title=”Portfolio Blog”]
Greg Powell, CIMA
Email Greg Powell here
Ashley Page, JD, MBA
Senior Vice President
Email Ashley Page here
Bobby Norman, CFP®
Email Bobby Norman here
Trey Booth, CFA®
Email Trey Booth here
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.
Stock investing involves risk including potential loss of principal.
Podcast: Play in new window | Download