We finally got what we’d been waiting for last week when Janet Yellen made her big announcement.
And the reaction was very interesting.
Now we’re left to discuss exactly what happened, why it played out how it did, and where to go from here…
A lot happened in a short amount of time last week. That’s for sure.
One day, interest rates were at zero, and the next day they were at 0.25%. That’s the outcome from Federal Reserve Chairwoman Janet Yellen’s big announcement that the economy is finally prepared for rate hikes.
And this is just the first of more to come, to be sure.
But the reaction wasn’t as expected, nor was it nice and tidy…
Instead, on the day the hikes were announced, stocks actually surged. That’s quite surprising considering all the negative reaction to the slightest talk of interest rate hikes in the past (especially that which triggered the big fall for the market in August).
But the market fell just as quickly on the following day, wiping out the strong performance of the previous day. And the week ended with another huge down day that was slightly bigger than the day before.
Yet rate hikes aren’t the only reason for the dip.
Investors are looking at a few things with dissatisfaction, including the pace at which the Fed is planning to raise rates further in the future, weakening commodity prices, and even worries over a slowing global economy led by falling oil prices.
That negative sentiment illustrates the fact that we’re simply not standing on solid ground right now.
The Fed decided to raise interest rates based on good employment data, but most other economic data is lagging behind.
And just to put a nice bow on the entire situation, this is all coming together in the middle of what appears to be a clear transition for the stock market. Whether the outcome will be a continued bull market or a brand new (an increasingly more likely) bear market, right now we can expect more volatility from day to day.
