On Monday, markets were back up, erasing most of their losses from the previous session. This is due to the fact that Brainard, the last member of the Fed board to speak to the media before the rate meeting – September 20 to 21 – came out against raising interests “too quickly”. That put all the air back in the bubble after some of it escaped on Friday, effectively leaving it poised to burst more aggressively when the Fed finally raises the rates.
The inevitability of a looming rate hike should keep investors on their feet for the next few months, if the Fed fails to raise in September. For those who kept their eye on statements by pundits – only 26% of experts polled believed in a September rate hike – surely took advantage of Friday’s dip to make a quick profit. More of these opportunities might come around December if the Fed kicks the can down the road yet again.
Nevertheless a rate hike is looming and should have already taken place. The least members of the Fed can do is to water down their remarks in an effort to quell ambiguity. Otherwise they will only be stoking the flames of speculation, letting the markets run wild on cheap money. They run the risk of having many people who depend on those investments, get burned when they put the fire in the markets out.
