Here Comes 2017

Here Comes 2017

The Trump rally continues….but for how much longer? A rallying stock market, rising bond yields and the return of inflationary pressures are creating new challenges for the Federal Reserve.

Investors are going to be looking past an expected increase in the benchmark rate and focusing on any signals about a more aggressive policy in the months and years ahead.

No surprise the FOMC came out and raised the Fed Funds rate by 25 basis points. Rates continue to move up too much and too fast. The market is hyperbolic in its bullishness, which has no basis in anything tangible other than optimism that Trump’s presidency will bring GDP growth and reignite corporate profit growth. It’s natural to want to be optimistic, but this rally is too powerful. At some point, early in Trump’s term, speculators will recognize the obvious: Trump isn’t a miracle worker.

Perhaps there is too much Christmas cheer and we need to take a look of Christmas past. Last January we saw the same scenario play out. Rate hike in December and the Markets went for a tumble.

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