Tuesday, December 18, 2018

All News is Bad News

Lately, it seems that any and all news causes the stock market to decline.  Probably what ever the Fed does tomorrow will do the same. 

  • Raise interest rates - This is the most likely scenario.   The stock market will view this as too aggressive since the economy is already slowing down and heading towards recession.   Even with a dovish 2019 forecast, an interest rate increase will be viewed as too hawkish.  Result - the market declines.
  • No change to interest rates - This is a possibility.   The stock market will view this as an acknowledgement the Fed has already raised interest rates too much and is concerned about causing a recession.   Result - the market declines.
  • Lower interest rates - This is unlikely.   The stock market will view this as a recession being imminent.  Result - the market declines significantly.
12 of the last 13 times the Fed raised interest rates, a recession occurred.  The market knows this and that's why all the Fed news tomorrow will be bad news for the stock market.

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This is not financial or investment advice. Please consult a professional advisor.

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