I have two points to make as we Americans settle down to celebrate and wish each other a happy Rate-Hike Eve.
I still believe a Federal Reserve 0.25% hike will not happen and I see action in the market that suggests the same thinking.
First, markets picked up on something at 3:30 pm Monday and took off 100 Dow points. This on the back of corporate credit scare. And markets are up in the futures market this morning 138 Dow points. That’s roughly 1.5% move higher on days when there’s plenty of headwinds.
Secondly, with the rate hike the Fed will have to sop up roughly $800 billion in liquidity in order to affect the change. The timing of this yanking of liquidity in the repo market seems ill-advised and ill-timed as junk bond market seizes up.
I have said since January that there will be no rate rise this year, so I may be wrong come Wednesday afternoon, but if they do raise I think it will be less the 0.25%, the market seems to believe that as well.