Football season is underway, and “hike” of course is the backwards passing of the ball at the start of play from the line of scrimmage! Unfortunately, that is not the kind of hike we are referring to here. The hike we are talking about is an increase in interest rates by the Federal Reserve. Broadly speaking, the stock market does not like interest rate increases. However, this rate hike should not be a problem for the market as it’s expected and comes during a time of economic strength.
According to the CME FedWatch Tool, there is a 95.6% probability the Fed will hike the federal funds rate by ¼ percent, to 2-2.25%, and a 4.4% probability there will be a ½ point increase when it meets and announces its decision this Wednesday. The market does not like surprises, and this hike is anything but a surprise, with market participants fully expecting an interest rate increase.
Also, the economy is in strong shape currently, and is able to handle a rate hike. Economic growth (GDP) most recently came in at 4.2% according to the Bureau of Economic Analysis. Looking at employment, the unemployment rate is 3.9%, according to the Bureau of Labor Statistics, which is a historically very strong level. So, don’t worry about the upcoming hike, it is expected and the economy can handle it!
Best – SSFM
All the best,
Southport Station Financial!