MARKET TALK: Fed twitching to raise interest rates
Market talk with Forsyth Barr's Kevin Stirrat - with special audio feature.
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Click the NBR Radio box for on-demand special feature audio: Market talk with Forsyth Barr's Kevin Stirrat
Global markets have long anticipated a hike in US interest rates but any upward move next month will still affect equities, according to a strategist at Forsyth Barr.
Minutes from the latest Federal Reserve meeting sent a strong signal, increasing the consensus expecting an interest rate hike in December.
Forsyth Barr head of investment strategy Kevin Stirrat told NBR Radio’s Andrew Patterson the Fed appears ready to twitch the interest rate and probably would have before now were it not for the ructions in China’s markets in September.
“A lot of [the price effect] is baked in but let's not ignore what’s happened in the past,” Mr Stirrat says.
“And generally what tends to happen is you do get a reaction and particularly with the Fed being the only central bank in the world looking to raise rates.
“Looking at equity markets, they are reasonably fully priced and if you look at the third quarter earnings reports we’ve just had, probably around half the companies have had negative sales growth over the last quarter.
“We’ve got price deflation going on around the world so it’s been very difficult for corporates to raise prices, and there have also been increases in wages, so margins are getting squeezed.”
For all that, the fact that the Fed may be ready to start tightening is a positive sign for the markets, Mr Stirrat says.
“I think that if the Fed has reached a decision where it can raise rates quite comfortably in the states and it’s supported by data, that means the US economy has strengthened enough to actually justify it.
“In effect that’s a positive sign for the market and that’s been taken as a tick and people are a lot more comfortable with it.”
Click the special feature audio he listen to the full interview.
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NBR Radio
Fri, 20 Nov 2015
Fri, 20 Nov 2015
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
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MARKET TALK: Fed twitching to raise interest rates
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