Last October AG engineered a liquidity event to keep the market from going into meltdown. Now the market will test his ability to shut the taps off in time.
If I remember correctly, the rate easinng/easy money policy, had its origin with the Russian economy entering meltdown stages, as it slowly it was Rubling down... which triggered last July downfall of the market lasting into October... (at which time whoever bought in most stocks did well.) yes, with Father AG's blessing...
If you think AG raising interest rates is the source of risk to the market -- and I don't know if that is what you or the thread thinks -- but if it is, then I would urge you to think again.
Well... indirectly, the fear and uncertainty of what will happen is the actual source of market two step tango... a [small] rise in interest rates, may actually be somehow healthy... this said, with a nervous laugh of anxiety, as I have no idea what the market would do in reacting to such move.
Picture a two year old being given a sour/bitter tasting cough medicine... he needs it but like hell he will like it...
But that is not considering the rest of the world economies into the picture.
Take Latin America, and other areas, I can not speak with full confidence about Asia and Europe, but I know that for Latin America, a US interest rate increase, would not bode well for the markets, and economies of Brazil, Argentina, Mexico, and Venezuela... and to a lesser extent Chile and the rest of the Lat Am countries.
A sea of money from investors and/or enterpreneurs would be moved into dollars, as the respective currencies would at some point devalue, as they view the US Dollar as an even stronger currency than it already is...
This, in my opinion, would cause most manufactured products and commodities produced in these countries, to drop in price, as many of these countries would rush to produce more ---(with cheap labor in some instances)--- more in order to receive hard currencies to save their own enterprises... I believe, the economist's grand old heads, considered, this was, the [now formerly prime] danger of deflation, who everyone was fearing not too long ago... now they have turned 180 degrees, and now they are fearing for inflation. So, who is right?
With due respect to the opinions expressed here, I am not so confident that AG really has that much control of rates... Other than a perceived one... which I accept it becomes real.
I think the so call Bond Vigilantes have a good handle on where rates should sit... and AG does sits and watch, and says BOOO! every now and then.... however I also think he may have other ways to control liquidity, perhaps in more subtle ways... Of which, I admit to be not all that familiar with...
Possibly, his largest single strength is the ability he has very smartly used, and that is to scare the hell out of markets by simply saying BOOO !
Personally, I do not think the Fed would increase rates, even in the face of and exceedingly good employment report, (bad news for the market.)
However, that would mean that the stock market would tank on its own, (and most probably the bond market would rise l/t rates... say 6.25% tops...)
Even then... the economic conditions would remain favorable for the US economy, with a new round of devaluations, keeping the lid on imported goods, and anything that is produced off-shore....
It is not as if interest rates are 8 % or 9%....
Yes there is a difference this time... most of the world economies are sick, and barely getting better, AND indirectly they will be affected by the policy established for the US direction of interest rates. If the US rises rates... we just shot the patient dead, and so the circus starts all over again....
Now... from a different perspective, this could affect Internet related stocks....
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