April 2nd, 2016 09:16 AM
Once again, Janet Yellen came out while the world waited anxiously for her to announce the Feds decision to hike or maintain interest rates. Janet Yellen used the phrase:
“(The Fed) will maintain the target range for the Federal funds rate at .25% to .50%”.
At the same time, she celebrated a jobs report that looks more like a fluke than a new trend and then in the same speech talks about Global Economic Prospects and its direct contribution to overall volatility. Technically, stocks have been in this volatile stage for almost a year. If we think back to what caused the volatility, it was the possibility of looming interest rates hikes.
Here is an article from David Rosenberg from the Financial Post you must read;
One thing that stuck out in this article was the overseas influence of foreign markets and banks essentially providing resistance against Janet’s plans. In the article Mr. Rosenberg wrote:
"The Fed chief is more concerned about the downside risks to growth and inflation from the weakening pace overseas than before, that much is clear — and whenever a central banker is uncertain, rest assured that the only certainty is that he or she does nothing."
Previously, maintaining interest rates would cause a market rally. On the other hand, last time Janet raised rates in December of 2015 for the first time in 7 years, markets basically dropped for a month straight. The Dow Jones dropped over 2000 points and was already in the midst of oil market oversupply. The S&P lost around 300 points.
It’s no surprise that Janet Yellen might be reluctant to raise interest rates again anytime soon, especially before the November Presidential Election with Donald Trump as the Republican nominee. A market crash before November wouldn'n play well for Democrats.
The ball is now in investors hands. The big question is, what will they do now?
Here is a CNBC before Janet Yellen Speech talking inflation, oil, and the Affordable Care Acts role.