The Most Boring Rate Hike Cycle Ever?

With the Fed set to announce their decision on interest rates today (even though markets give just a 4% chance of a hike), we honestly couldn’t believe that it’s been 183 days since the last fed rate hike. When does a rate hike cycle stop being a cycle and just be a single hike?  Regardless, it seems like a lot has happened since we put together our “Infographic: Your Portfolio Guide To Rising Interest Rates,”  so we updated a section in it to reflect the current environment.

June Fed Meeting Update

While this gives a snapshot of the probability of rising interest rates now and in the coming months, here’s some other factors that the Fed may be weighing.

  1. Inflation & Deflation

Last Fed meeting, the FOMC said that if economic factors meet their benchmarks, it would raise rates.

“Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the committee’s 2 percent objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June,” it said.”

But a recent depressing jobs report showing the weakest pace of hiring in nearly six years, sort of put the everything’s great in the economy vibes on the backburner for now.

  1. Brexit and VIX Spike

In the past three trading days, the VIX has spiked roughly 57% as Europe has sold off heavily due to concerns about the Brexit.  A spasm like this heading into the meeting is likely to make them that much more nervous.

  1. World Negative Interest Rates

The German 10-year sovereign bond yield turned negative for the first time ever today. Germany is not alone in negative interest rates. While the U.S. raised rates in December, the rest of the world is doing something different and something unprecedented.

  1. The 2016 Election

This might be a little premature as we are months away from the election, but a change in POTUS means a change in economic policy, which could mean a change in the markets.

The chances are small we see a rate hike today, but they’re greater than zero. Plus, as Han Solo said, never tell me the odds.

 

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.