Newsletter dated March 09, 2017

Share this post

Global financial markets have still been heading to new record levels. The Dow Jones Industrials reached 21’000 and the broader S&P500 reached 2’400 index points – for the very first time in history. This might have been the trigger for Federal Reserve Chair Janet Yellen to single out the danger of the central bank being too slow in boosting rates. She left little doubt on Friday that the central bank will raise interest rates this month. More importantly, she dropped hints that it might end up having to increase them this year more than planned.

A subtle change of her words in her assessment of the current stance of monetary policy from “modestly accommodative” in January to “moderately accommodative” seems to be the code that there will be a rate hike at the next meeting on March 15th. According to forward rates market participants updated their expectations for a Fed Fund Interest Rate increase from about 30% few weeks ago to nearly 100% recently. See also our chart of the day!

According to the central bank’s Beige Book economic report the economy grew at a modest to moderate pace across the U.S., further tightening the labor market but without significant acceleration in wages or inflation, a Federal Reserve survey showed. Some districts reported “widening labor shortages,” indicating full employment. Several policy makers said the central bank is close to achieving its dual goals of bringing unemployment to its lowest sustainable level and inflation to 2 percent.

Erwin Lasshofer and his INNOVATIS team continue to expect that the US Fed will curb any boom in equity markets by taking the chance to increase interest rates back to ’normal’. Thus we see better opportunities in structured products than in equity markets. Ask us for our Managed Account for an easy and convenient access to these instruments while keeping full control of you funds in your own account.