U.S. jobs market strongest for a decade, says Yellen
Dec 21 2016 by Cristina Jennings
"The only reason the Fed raised rates this December is the same reason they did so last December: they did it despite having no confidence in the economy, but they didn't want to send a message that they were that anxious". But, it managed a solitary hike.
A bond's value is best expressed as its yield, a measure which consolidates the bond's coupon or interest rate and the bond's price into a single measure.
She told graduates that "after years of economic recovery, you are entering the strongest job market in almost a decade". In that meeting, Kansas City Fed Chief Esther L. George, Cleveland Fed Chief Loretta J. Mester and Boston Fed Chief Eric Rosengren were desirous of a rate hike. A strong dollar will also dampen the exports that Trump believes are central to economic health, making US products less competitive.
"Dow 20,000 certainly sounds great, but there are a few things one should keep in mind before putting too much emphasis on it", Andrew Adams, market strategist at Raymond James, wrote in a note.
Making it only the second rate rise in the past decade, the last rate rise coming a year ago in December 2015 when rates moved from a record low 0.25% to 0.5%.
Unfortunately, unlike the Japanese and European stock markets which are also rising, the PSEi did not follow the US' lead.
During the campaign, the President-elect indicated he would push for higher interest rates and publicly chided Federal Reserve (FED) chair Janet Yellen. A bond's yield moves inversely to its price. With significant foreign investors in our financial markets, equity markets may witness some sell offs.
The danger is that the "Trumpflation" trade gets ahead of itself as investors bet on an even stronger dollar, spurring further capital outflows from China, which have already reached $600 billion this year according to JPMorgan, and causing a sharper and more abrupt fall in the yuan. Surge in gold and crude imports was the main factor. Given that, and because we find ourselves in unusual times today, if you need a mortgage today and think that five-year fixed-rate pricing is temporarily out of whack with longer-term fundamentals, locking in a variable rate (or a shorter-term fixed rate) makes sense. However, with the stock market relatively stable and dollar correcting towards the end of week, the local currency recovered some of its losses.
Although the December hike was expected, markets have been roiled by the expectation that the central bank will accelerate the process next year if inflation levels perk up once again. Data on demonetization and speculation on budget sops will be key drivers for the domestic players.