Posted By admin on Dec 16, 2015 |
It's not about the rate hike cycle that is now upon us or the accompanying statement by the Fed. What today's move up a quarter point in the Fed Funds rate meant to the market was the simple vanquishing of the wet blanket that has been spread across equity prices for the second half of the year. The incessant debate over Fed policy combined with the potpourri of worries on a loop didn't allow investors to properly focus their attention on all the harmony that exists in the economy at present.
With the wet blanket removed, investors can now focus on the fact that unemployment continues its downward trend; inflation is non-existent; interest rates are still inordinately low and favorable to business; commodity prices are favorable to consumers; earnings are growing especially in technology and financials.
Most importantly, developed markets are where its at and that dynamic isn't changing anytime soon. What happened during the past decade is that a vast global misallocation occurred away from developed, technology/financial led economies into emerging, commodity led economies. That misallocation is now in the process of being recalibrated. Along the way, we get news every so often of an imminent implosion of debt tied to this unwinding that effects all asset prices, developed economy included. As I've pointed out in the past few months, those are the buying opportunities, of which there have been many in 2015.
Developed economies, of which the U.S. is the predominate player, will continue to attract global assets. That's the bottom line.
Now that the Fed has exited stage left with very little in the way of future surprises or indecision, the markets are free to focus on the continued rebalancing act of capital that has been ongoing since the start of this decade.
Bulls win.
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