Thursday September 17, 2015

// September 17th, 2015 // Daily News

When the Fed raises rates, here’s what happens
CNBC.com

A rate hike will come and the bull market will stumble, bond yields will climb and the economy will slip into a recession.

This we know.

What we don’t know is how long all of that will take and how long it will last.

For the economy specifically, history offers little guide about timing. A recession has come as quickly as 11 months after the first rate hike and as long as 86 months.
The Federal Reserve’s aggressiveness in raising rates is often, though not always, a determinant in how the economy and financial assets respond. That’s why officials at the U.S. central bank have stressed so vigorously that investors should not be focused on when it starts raising rates but rather the trajectory of how long it will take to normalize.
There are, indeed, multiple variables at play. In the end, however, market participants may find that all the rate-hike fuss may have been overdone.
“The first hike from the Fed since the global financial crisis will inevitably be interpreted by some as signaling the end of the era of ‘cheap money,’ ” Julian Jessop, chief global economist at Capital Economics, said in a note to clients. “In contrast, we do not expect the gradual return of U.S. interest rates to more normal but still low levels to be the seismic shock that many seem to fear.”
That’s not to say there won’t be effects, however. Here’s a look at how some areas of the economy could react, based on historical trend.
As the market has seen over the past month or so, anticipation of rate hikes can make things volatile for a while. Once the hike hits, though, the impact is not as dramatic.
“It does seem there is a trend for equity returns to stall 12-24 months after the first hike, which again perhaps reflects the lag in monetary policy,” Deutsche Bank analysts said in a recent study of what happens after the Fed hikes.
More specifically, the market over the past 35 years or so is most often up sharply—about 14 percent—heading into the rate hike, fairly flat in the 250 days after (average gain of 2.6 percent) then back to normal once 500 days have passed, with average return in the past six cycles of 14.4 percent, according to a recent analysis Bob Doll, chief equity strategist at Nuveen Asset Management, posted on Barron’s.
Deutsche said the impact on stocks tends to get more pronounced later in the rate-hiking cycle and returns begin to diminish.

Today’s Inspiration

Carried in His Arms

by Joyce Meyer – posted September 17, 2015

I will say of the Lord, He is my Refuge and my Fortress, my God; on Him I lean and rely, and in Him I [confidently] trust!
– Psalm 91:2

At various points in our lives, all of us feel we’re getting “out of our depth” or “in over our heads.” There are problems all around: A job is lost, someone dies, there is strife in the family, or a bad report comes from the doctor. When these things happen, our temptation is to panic because we feel we’ve lost control.

But think about it: The truth is that we’ve never been in control when it comes to life’s most crucial elements. The only thing that holds us up—and the thing we can be most grateful for—is the grace of God, our Father, and that won’t change. God is never out of His depth, and therefore, we’re safe when we’re in life’s “deep end” because we can trust that He will always carry us in His arms.

Prayer of Thanks
Thank You, Father, that You are a refuge for me. I know that because You are with me, I can feel safe and secure. Thank You that no matter how difficult life may seem, I can be at peace because You will never let me go.

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