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Durudarshan - Investment Analysis

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Can the U.S. Federal Reserve afford to hike the rate just yet?

Posted on May 27, 2016 at 1:59 PM Comments comments ()
The world seems focused on whether Fed Chairwoman Dr Janet Yellen will announce a rate hike, or give an indication on when this somewhat dreaded eventuality may take place. 

I suggest that it would not be prudent, not just yet, in spite of the good economic numbers which suggest a continuation of the economic Recovery in the U.S.   Problems in Venezuela and Brazil and the Oil exporting nations, all seeming to go through what seems temporarily recessionary environments, together with perceived slowdowns in the BRICS nations, all with their top-heavy benchmark interest rates, would suggest that all those nations may be best reducing the rates instead.

Reason number one is the impending general election.  On past indications, the DOW has moved upwards between July and October if the polling data suggests victory for the Democrat candidate; or slightly downwards if its appears the Republicans will be in.  This time will be no different.  Wall Street are friends and supporters of Hillary Clinton; if she is elected President this time, it will spell good news for the financial markets (inter alia a dovish and stimulating policy from the Fed).  Of course, it will be the news to sustain the Silver Seniors, as Hillary will look after the interests, and deservedly so, of the retired folks, but also have a kind policy for the welfare of the youngsters, as is Democrat canonical policy, plus of course an improvement of the Affordable Care Act (Obamacare), for which she would have been the proponent (had she made it to the White House last time round). 

It will be interesting to see what Hillary does when she is Madame President.  I assume she will pursue humane and people-friendly policies, as is the Democrat tradition, as well as try to nurture peace internationally, as is also a great Democrat tradition faith.  The world at large it seems are very hopeful of seeing her win.   With her unparalled experience as Secretary of State for Defense, she has a unique grasp of the international scene; she was a trusted power broker in the Middle East, and I gather from her writings that she would be the one to further the cause of peace in this region.  Most of her friends there I imagine are eagerly anticipating her victory - needless to say, she will have a ready made agenda for peace in this region. 

The possibility of Donald Trump becoming President seems to excite and at the same time alarm a lot of people.  This double-talking bombastic billionaire insults and enthuses in equal measure.  He is needless to say a mercurial personality, who would rather openly confront people than harbour hidden rebukes.  The Mexicans and the Muslims and the new London Mayor, Sadiq Khan, may look forward to interesting exchange of words with the irrepressible Donald Trump.  It seems he has been a President in the making for nearly four decades, but only formally taken up the cause this once.  He is out to win, and most people seem to fear him and stand out of his way.  People would not like to be obligated to such an atmosphere of fear, and will therefore be doing everything possible not to see him win.  But he is a revisionist, and will reconsider what he has said and make corrections, and win back peoples' friendship or goodwill.  Whether that is just for the time being, while he is in a Presidential mood to try and clinch the office, and how such thinking will translate in policy and action when he's actually in charge, and constrained by the protocol of high office, remains to be seen.  It will be up to the people as a body politic to decide, and that will be clear within a few months.

Until 9th November, when the new President-elect will be clear, be it Hillary Clinton or Donald Trump, it may be wise not to hike the rate.  Better still, it may be best to wait for 20th January, when the new President has the keys to the White House and the Oval Office.  Then the rate could be in line with the policies the President is expected to pursue.

I pray for progressive and peace-making policies for around the world.

Kind regards,
Durudarshan

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