US Economy Facing Headwinds, Fed Overtly Dovish

US Economy Facing Headwinds, Fed Overtly Dovish

As speculation continues over when and whether the US Fed will raise interest rates, experts are seeing several headwinds as shown in the updated GDP figures this week, including the drop in Crude Oil prices, the strong USD, and the saving not spending consumer, as headwinds for the economy that have slowed but still blow.

It does not matter when the Fed raises rates in the Fall or Winter, as it will be a symbolic to get above Zero to have room to maneuver, just in case.

Recall, that Fed Chairwoman Janet Yellen said that the Fed is still looking for evidence of tightening in the labor market.

Democratic Senators have told Ms. Yellen that they are not seeing strong labor markets in their states, and they do not want the Fed to raise interest rates.

Market participants should look to diversification within and among Key markets, because valuations are stretched.

Mutual fund managers are saying that as more retail investors have taken part and have used margin financing, they seem to assume that the government will back up the market. Many observers have noted the effect QE has had on stock prices.

The US government is promoting mutual funds as the default choice for blue-collar workers, and the government would also step in to prevent a stock market crash, humm.

It is noteworthy that the US  inflation numbers are nowhere near what the Fed is looking for, and bonds are rallying in here. So, the Fed’s sentiment is overtly dovish.

Have a terrific weekend.

HeffX-LTN

Paul Ebeling

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