Markets Rattled by Rate Hike Possibility – Ep. 193

Markets Rattled by Rate Hike Possibility – Ep. 193


* We had widespread selling in the markets today; it was real carnage across the board
* Everything went down except the U.S. dollar
* The Dow Jones was down 394 points - about 2%
* That wasn't bad compared to what happened in other indices and other sectors
* In fact, when it comes to the Dow Jones averages, the utilities were the weakest, they were down 3.7%
* The NASDAQ was down 2-1/2%; the composite down 133 points
* Various sectors were hit very hard; particularly the interest rate sensitive sectors;
* Home builders got crushed
* Emerging markets got obliterated
* Gold stocks were down big - almost 6% on the day
* That's on basically a .6% decline in the price of gold; gold was down only about $10
* Silver dropped about 50 cents
* What's going on? It has just been 2 days when I did the last podcast
* Gold was soaring, the dollar was tanking, the markets were going up
* Why?
* The economic data we got for August confirms that we have the weakest economy, maybe in 6 years
* If you remember, what caused the markets to be concerned was the Janet Yellen/Jackson Hole statement that the case for a rate hike had strengthened based on the economic data that came out in June and July
* Based on the data released since she made that speech, this is data about August, that case has now weakened considerably
* The August data shows that the data that we got in June or July that might have been positive was a one-off event
* Now we're back in weakening mode, and so, if the Fed really were really data dependent, according to Janet Yellen
* Now the data is awful
* So why would they hike rates? That's exactly what happened
* The markets started to take those rate hikes off the table
* I never thought they were on the table, but there were many people who bought into it
* When they saw this horrible data, and they knew the Fed was data dependent, the markets reacted
* Now, in the last couple of days, particularly today, people are now questioning whether or not the Fed is actually data dependent, and they're thinking they're going to raise interest rates, even if the data is bad
* Now what would make them jump to such a conclusion?
* We had several Fed officials, both yesterday and today, who continued to talk about the possibility of rate hikes and nobody has acknowledged the recently-released weakening economic data
* I have said many times they don't want to acknowledged that data
* That plays into Donald Trump's campaign
* They'd be peddling fiction!
* They don't want to talk about a weakening economy, so they have to ignore the data
* But the fact that they are ignoring the data while continuing to talk about the possibility of rate hikes
* That's got everybody scared
* All these guys say is that there is a possibility of a rate hike
* A possibility is not a probability
* It's certainly not a certainty
* But the markets are acting as if the Fed is about to raise rates, and that's why everybody is so scared
* It's not just the Fed; yesterday in Draghi's press conference was asked about his plans when the QE program ends (it is scheduled to end Q1 of 2017)
* He basically said he doesn't have any plans to do more QE
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