Will The FED Raise Rates Tomorrow?

thefinanceguy (63)in #money • 8 years ago

The consensus in the financial markets seems to be that the Federal Reserve will raise interest rates again, with the last time being this same month last year.

If last year's hike was any indication, it can be assumed that A.) the hike will be very modest and B.) the stock market will react badly. However, I have no clue how millions and millions of other participants in the financial markets will specifically react to a rate hike, because I still don't understand why the market is so euphoric after Trump's win. Last year, we were coming off an extremely volatile September and the story of slow growth is China was keeping the overall sentiment very negative. This time around, the Trump euphoria is still in effect, so it will be interesting to see what the reaction to another rate hike would be.

As I said before, I feel that trading strategies based on macro and political events are extremely difficult. Yes, some people do make a killing if they speculate the right way, but I don't specialize in that kind of strategy. For me, it is much simpler to identify great companies and then buy them when the share prices are reasonably discounted from the real or intrinsic value of the company. It's hard to find bargains when the market has risen as much as it has lately, which means a value investor must look for the forgotten and unloved stocks all over the world, not just in the US. It also means that the best thing to do might be to just sit and wait with a cash position, until a good deal becomes available. This is easier said that done though, which is why those who can actually be patient will likely benefits.