By C. Jonathan Camarda
CMT®, CPWA®, CFP®, ChFC®, CLU®, CFS®, BCM®
There are whispers of the uncertainty heading into next week’s long-awaited Federal Reserve meeting. Conflicting economic data is fueling the indecisive feeling. Initial unemployment claims fell by 6K to 275K—net/net for a healthy job market. It certainly would support the case for Janet Yellen and Co. to raise rates. On the other hand, import prices fell 1.8% in August, besting the 1.7% loss most economists were expecting (this—as we have discussed many times—is driven by a stronger dollar and lower oil prices). Of course, the Fed would like to have inflation be at the 2% level before lifting the rate “curtain”. The fact that prices are falling favors no rate hike.
It has been equally intriguing while listening to former Treasury Secretary, Lawrence Summers, and former Dallas Fed Chief, Richard Fisher, send conflicting signals on what the Fed should do in regards to the “should we hike or should we not” show on September 16-17. Summers alluded to the fact they should wait, while Fisher said it might be the perfect time to “tee it high and let it fly” (ok, that was my wording). Again, the backdrop weekly jobless claims came in as the predicted 275K and were down from the previous 281K. The employment situation has held up well—given we are well below the 300K level, which has the point Fisher is making stronger. The fact of the matter is, the consensus is becoming that with short-term rates at just about zero a quarter point raise should realistically have very little impact. If the economy is, in fact, as strong as it appears, then the Fed moves towards “normalcy”—regarding rate levels, that should not shake the proverbial “hornet’s nest”, which has been the global financial markets. I believe it is Alan Greenspan—famous for his play on words—who coined the phrase “taper tantrum”, regarding potential market reactions to even a quarter point rise; however, the tweak towards normal interest rates appear to be the healthy move at this juncture.
Meanwhile, regarding markets, the main three—S&P 500, Dow Jones Industrials, and NASDAQ—are all still below their pivotal 200-day moving averages, as well as their respective 50-day moving averages. Net/Net we are still in correction “mode” until this current trend reverses. Stay tuned . . .
Blue lines are 50-day moving averages and the red lines are 200-day moving averages.