What if the ‘Experts’ are Wrong?

I can’t remember ever seeing so much attention devoted to one Federal Open Market Committee meeting.

This week, the Financial Times allowed readers free access to its online edition, and in it there was a prominent feature that delivered all-you-can-eat Fed analysis.

And while there seems to be a nearly endless barrage of speculation on what the Fed is going to do when it meets next week, all this speculation certainly is understandable … given the stakes.

What’s at stake here is nothing less than the future direction of monetary policy, the economy, the domestic equity and bond markets, global equity and bond markets — and the fate of nearly every American’s pocketbook.

While that may seem like hyperbole, it’s really not.

We’re in an era of artificial "juicing" of the financial markets by central banks around the globe. So, a move by the biggest and most-influential central bank to put the brakes on the monetary racecar could cause the entire global economy to stall out.

That won’t be good for any of us. But it will be particularly hard on investors who are relying on stocks and bonds to fund their retirements.

***

In Friday’s Wall Street Journal, there was yet another article with Fed meeting speculation. But this one was noteworthy because it presented the results of the latest WSJ survey of top economists.

According to the survey results, most economists predict the Fed will stay on hold in September.

Here’s what the WSJ survey found:

•  46% of economists surveyed predicted the Fed would hike rates at the Sept. 16-17 policy meeting

•  9.5% said the Fed would wait until the October meeting to hike rates

•  35% said the first rate increase would come in December

•  9.5% said the central bank would wait until 2016 before raising rates

Taken together, the no-September-rate-hike camp represents 54% of business and academic economists surveyed.

If you recall, the conventional wisdom at the beginning of the year suggested that the U.S. economy would continue to improve … enough so that the Fed would greenlight a summer rate hike.

As the WSJ put it:

At the beginning of 2015, most economists thought the Fed would raise rates by midyear. After an economic slowdown in the first quarter, predictions for the first rate increase coalesced around September.

But turbulence in financial markets and worries about China’s economic slowdown raised doubts in recent weeks about whether the Fed is ready to begin raising its benchmark Federal Funds rate, which has been pinned near zero since December 2008.

Now the conventional wisdom is calling for no rate hike.

But, what if the "experts" are wrong?

***

Given the consensus that there will be no rate hike next week, if we do get one, I suspect that all hell is going to break loose in the markets.

One reason why is because the expectation of "no hike" has caused tension to build up for traders. Like a loaded spring, if that tension is suddenly sprung, we could get a violent reaction that would cause stocks to plunge precipitously.

I certainly have my guard up against a "surprise" Fed lift-off move.

Given that next week is going to be perhaps the most-important week of the year for stocks, bonds, commodities, monetary policy and the economy, we will of course be watching the action with bated breath.

Until then, remain cool and collected — and please continue to allow us to help put all the action and reaction into perspective.

***

So, do you think the Fed is going to raise rates next week? What do you think will happen if they do?

Share your thoughts with me by leaving a comment on our website or by sending me an e-mail.

***

U.S. stocks finished this 9/11 anniversary on a positive note, as the major averages all managed to log modest gains Friday, and solid gains for the week.

For a poignant take on the meaning of 9/11, and why we all must never forget, check out my colleague Jim Woods, writing for the Sound Dollar Campaign.

Also in the news today …

•  Oil prices went back to their falling ways Friday, with futures settling under $45 a barrel. Oil was down about 3% on the week.

•  Adding to oil’s woes was Goldman Sachs (GS), which cut its price forecasts and warned that the market’s surplus of crude supplies may push prices near $20 a barrel.

•  Stocks in Asia saw their first weekly gain since July. The Shanghai index added 1%, and Japanese stocks helped to lead the MSCI Asia-Pacific index higher by roughly 2%.

•  Serena Williams lost her U.S. Open semifinal match against Roberta Vinci, ending the great champion’s quest for the elusive calendar year Grand Slam.

•  Louis C.K., Steve Buscemi, Whoopi Goldberg and other sports, music and Hollywood stars took to the trading floors for Cantor Fitzgerald’s charity day. The company, which lost roughly two-thirds of its employees in the 9/11 attacks, raises money in their honor for a wide range of charities.

•  If you’re eager to pre-order your next Apple (AAPL) iPhone, the company starts taking pre-orders at 12:01 a.m. Pacific time on Sept. 12. So, be sure to take a nap or enjoy some extra coffee tonight!

Good Luck and Happy Investing,

Brad Hoppmann

Publisher

Uncommon Wisdom Daily

Your thoughts on “What if the ‘Experts’ are Wrong?”

  1. I believe that Sep 16 2015 will come and go without financial ruin on Wall St or our lives. This month is already the most hectic we have seen in the market for some years, but it’s just an over do correction which will likely continue for the rest of the month. I believe the Bulls will come back to end the year higher.
    Here’s to the best of good trades.
    Tom Scott

  2. I think that if the FED’s raise the interest rates after the meeting next week we will have a short sell of as there will be those on that side of the fence who will panic. Then that will stabilize and we will continue with the market correction that we are in the middle. We have not had a good pull back in quite a few years.

    We need interest rates to begin moving up but a little at a time, I would think just bringing the rates up 1% to start would be enough for a little while. This way we can start gaining a little strength back into US currency.

    Yes the world bank really does not want to see it but this is needed badly in my opion and if it is done in very small steps we help the monitory system.

  3. Fed will not raise rates in Sept. because it would raise value of dollar and harm emerging markets. Also would impact the loose peg on China currency and their entrance into IMF

  4. For the “most-influential central bank to put the brakes on the monetary racecar could cause the entire global economy to stall out.”

    The global economy has been dead on arrival for quite some time now. Global economic growth (at least in the West & in Japan) appears to be no more than a politician, economist, statistician & banker created illusion. Likewise, Fed monetary policy has been much less like an opiate than an economic version of artificial respiration. Your “racecar” analogy would probably be better described as an express elevator to national bankruptcy & the subsequent end of the traditional “nation state” as we have come to know it. For It now appears that the Fed “first responder” may have run out of the strength (& the will) to continue pumping the chest of its century old victim. The chickens of BIS sponsored, fascist-corporate, “War by Other Means”, exported debt are finally coming home to roost. It has been coming for years. The only thing that continues to amaze this observer is how many people continue to believe that these “consequences” are somehow “unintended”.

    What began as the birth of fractional reserve banking (as far back as the Knights Templar), to the financing of every side of every conflict since at least the Napoleonic Wars, to Colonial Imperialism, to the engineering of “non-elected” international bodies for “democratic” conflict resolution, to socialist revolution, to the creation of an internationally connected central banking system, to the universal incorporation & exhortation of the socialist welfare state, to its transformation into an insurance scheme for corporate welfare, has now become the ultimate wealth consolidation tool from the many to the few. All by design! As the elite respond to all the global crisis of their own intentional creation (forced refugee emigration, border destruction, job exportation / destruction, debt deflation, etc.) & lead us inexorably toward yet another World War (WWI Part III to be precise), witness as their plutocratically controlled governments (& extra-national bureaucracies) create more & more Orwellian measures for “control”. Then watch as “We the People” welcome with jingoistic cheers the complete & utter destruction of all remaining mechanisms designed to protect the liberty & security of the individual. What we currently endure is no more than the re-introduction of feudalism, this time on an international scale (see the ongoing sell off of Greek national assets, the Cypriot “bail in”, the Polish retirement “confiscation, etc.).

    With no more than a cursory view toward history, the centuries old enslavement of the many by the few is simple to discern. However, it is the question “To what end?” that most find far too hard & terrifying to address. The unemployed & impoverished tend to plan daily. The lower class employed tend to plan weekly. The middle class tend to plan monthly. The upper middle class tend to plan longer term still. However, the truly elite (those who pull the “important” strings) tend to plan in generational terms. Who has the advantage?

    Real wealth equal real power & real power it seems is the ultimate aphrodisiac. Same as it ever was! The ongoing mistake is to continue to look to those whom historically have purposed the demise of the little guy as his potential savior. For those of you who embrace the concept of “the Big Bang”, it seems that our very universe has proclaimed too much centralization is not the preferred methodology for “growth”. Good luck & God Bless to all.

  5. I can’t copy my favorite picture to your comment section, not skilled enough I guess. But if you are really interested in what one of your readers thinks, google the words ” building #6, 9-11, pictures ” . My favorite picture is the aerial view of Building # 6 with the missing core beside the pristine roof of the Bank of International Settlements. You see, it doesn’t matter what you or I think. Someone else is in charge and when they are ready for us to crash and burn, they will flip the switch.

  6. The Fed will not raise rates at all for the remainder of this year.Give these people some credit they are not stupid,I don,t care what THE DONALD says Mr.know it all him self.They are well aware of what they would trigger.Nothing good for this Countrys montery markets thats for sure or its people,

  7. The Fed will raise rates by .25% and this will not have the huge crash effect most are predicting. The market may throw a tantrum but it will get over it and it will be back to business as usual with a volatile trading range but not a crash just a correction.

    Peter

  8. Writing from Canada. I don’t know why the US election hopefuls are spending so much time and money on re-election campaigning. For that matter, why bother with an election since the FED is control the entire economy including the stock markets. Economist and news media have become obsessed with every word said or not said, not to mention the words used or not used with each of the Fed chair’s statements. It behoves me to understand this obsession. If the FED is running the country, what is the president and his elected officials doing? If governing officials were doing their job, the Federal Reserve would be an insignificant entity.

Comments are closed.