Weekly Newsletter #5/2015

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So what about rate hikes in the US now? When will the FED start to increase its rates for the first time since 2006? Well, people are expecting this to be very soon and the US Dollar already factors in higher rates for some part. But yesterday’s comments from the FED officials regarding those rate hikes show, that there are a lot of factors that are considered, especially on an international basis. Of course the data from the US economy are the most important ones, but you have to consider, that the US economy is strongly dependent from the situation in other parts of the world.

The job creation in the US was pretty good, but the strong US Dollar is everything else than good for exporting goods to other parts of the world. Furthermore the falling energy prices lower inflation, even if this effect could be a very short term phenomenon. To sum it up a lot of people are waiting for the rate hike(s) to come and it would be justified if the overall trend continues like this. But you always have to keep in mind, that there are a lot of factors that you have to consider and which have the ability to change the picture quite fast. So don’t take a rate hike in the next few months for granted.

Otherwise you could experience a big disappointment. Howard Marks from Oaktree made a good statement in his latest memo about oil, which also fits the rate discussion: „Asset prices are often set to allow for the risk people are aware of. It’s the ones they haven’t thought of that can knock the market for a loop.

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