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Friday, August 24, 2018

New Record Highs After Fed Chairman Powell says The US Economy is Strong!

Today, three of the four major US stock market indexes I follow closed at new record highs.
In Jackson Hole, Wyoming this morning Fed chairman Jerome Powell said the strong US economy justifies raising interest rates, but in a gradual fashion.  Most take this to mean the Fed will raise rates in September and perhaps once more before the year ends. 

From "Monetary Policy in a Changing Economy"  Transcript

“As the most recent FOMC statement indicates, if the strong growth in income and jobs continues, further gradual increases in the target range for the federal funds rate will likely be appropriate
The economy is strong. Inflation is near our 2 percent objective, and most people who want a job are finding one. My colleagues and I are carefully monitoring incoming data, and we are setting policy to do what monetary policy can do to support continued growth, a strong labor market, and inflation near 2 percent.”
This expected 0.25% rate increase in September would bring the Fed Funds rate to a range of 2.00% to 2.25% from its current range of 1.75% to 2.00%.

I discussed this in my latest newsletter and Timer Digest wrote about it this weekend:

my commentary
Here are charts of the four major US stock market indexes I track showing that in fact the markets were happy with the Fed raising rates.

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More about Timer Digest: "Timer Digest monitors over 100 of the leading market timing models, ranking the top stock, bond, and gold timing according to the performance of their recommendations over various periods of time. Timer Digest profiles many of the Top Investment and Financial Newsletter writers, including discussions of their timing models."
Treasury Bond Rates vs the Fed Funds rate

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