Most stocks are now threatened by the rise of Fed rates
picture: do you celebrate your birthday,
and all around non-stop talking about
your death. Such is the life of the bull
the stock market, which is officially “notes”
six years this week.
focus on the 200% increase in the stock
market, where investors are more worried
about whether there is a likelihood that the stock
They will live and still see the seventh day
Birth “bull market”. The biggest
threat for him is just a rise in interest
rates from the Fed.
Remember how the action
fell on Friday – after a few days
after the Nasdaq broke through the level in
5000 points for the first time in 15 years. so investors
We were surprised by the strong February
employment report, and analysts
indicate a high probability of raising rates
The Fed in June. In other words, good
unexpectedly bad news
– for the market, at least.
«S P 500 awoke after
hangover from euphoria Nasdaq, then succumbed
casual “worker” (Refers to the reports on the labor market – ca. Perevi.). fright “, – writes
Sam Stoval in the report, chief investment
strategist S P Capital IQ.
So why is Wall Street
I lost sleep over some wretched
1. This is the end of light
money. To raise interest rates –
it’s like to push the punch bowl away
from the stock market. One of the locomotives
bull market since 2008 – it is a policy
Fed to keep rates close to zero.
These emergency actions pushed
investors into riskier assets,
making it less attractive alternative.
Remember that cash in the bank virtually
do not work, and bond yields
It was extremely low, which is why investors
rushed into action.
2. Historical “red
flags. ” If you look at history,
then the fears of investors about the
rate hikes have a certain
meaning. After the Second World War was
16 cycles, during which the Fed raised
interest rates. Risks are particularly acute
felt when the Fed raises rates
first. In the six months before or
after the first increase rate of 500 S P
experienced a decline in the amount of 5% – more than 13 times,
According Stovala. It means that
More than 80% of the time the stock market suffered
hit when the Fed raised rates.
Is the market chained
Fed “handcuffs”? some investors
already afraid of negative reaction in the
time – Dow Jones fell by 279
points on Friday in response to the news
that the unemployment rate fell
to seven-year low. And although the market
recovered slightly on Monday,
the ongoing turmoil in the stock
the market can actually become
"If this continues,
The Federal Open Market Committee (FOMC),
It is not likely to move. Fed plays
in the stock market. Let us not
pretending that nothing is happening".
– says Michael Block, chief market
strategist Rhino Trading. he pointed
the fact that in October the stock
the market began "jump" after the statement of the head
St. Louis Fed James Bullard, who
He suggested the central bank to expand
its bond buying program.
Investors reaching for any comment,
Although the Fed is ultimately completed
quantitative easing program.
"Here’s how the Fed twisted these days"-
Suppose that the Fed
It is actually ready to go ahead and
will raise rates in June or at the end of the year.
How the market will react?
History does not give
the ability to accurately predict how
It will be hard after the Fed raising rates.
In past times was different negative
the reaction in the stock market, including
three bear market, when stocks fell
at least 20%. Stock market
also survived two rollback (decrease
at least 5% but less than 10%) and two correction
10% or more.
Stoval believes not
will bear market,
especially because the US economy
It looks healthy, corporate earnings
continue to grow, and the shares still look
better than the alternative assets. But
one thing is clear that a correction is long overdue.
S P 500 did not suffer from decrease of 10%
or more over the last four years (from
October 2011). This usually happens
once a year and a half.
Correction may be
terrible for investors, but it may be
it is a healthy thing in the long
term. This will allow cash
sit on the sidelines, then to
you can use them for purchases at more attractive
prices and ease fears that stocks
It became too expensive. The average take for S P 500 just four months,
to get back to break-even after
correction, said Stoval. "although this
it may be appropriate – to prepare
to correction, but you need to immediately prepare
and to restore the – ultimately,
and we may be able to extend this year
on good colors and then we will celebrate
It has seven years of the bull market", – he said.