Hurry Up and Wait


The Federal Reserve Board (FRB) announced last week, to much anticipation, that they were going to do nothing… yet.


So now we are left to wait for the next fed meeting in 6 weeks to wonder what they will say next. The only change in language was an indication that after an initial raise in rates that the FRB intends to flatten rate activity after the first hike. This will allow them to view the impact of rate increases on our current economic environment before tangibly increasing rates substantially.

Initial reaction would be to say the FRB has plenty of historical reference to see how the economy should respond, however quantitative easing over the past several years makes this expansion uniquely dependent upon FRB activity. Their choice to normalize interest rates prior to reducing their balance sheet sends the message that rate changes should be less impactful than removing direct liquidity.

Only time will tell, but for now we are to wait and see how the second half of 2015 plays out in order to know if the FRB intends to raise rates in December or potentially early 2016, as the International Monetary Fund (IMF) would love to see. The FRB Chair, Janet Yellen, has been casted as a Dove, but it appears that she’s being more pragmatic than anything else.


Greece is dominating the headlines internationally. Through last week no resolution was attained, in fact, talks broke down last week causing many to believe a default was eminent. An eleventh hour resolution is expected at this point at the end of June.

The fall out of a Greek default is not nearly as concerning as it was 5 years ago. Clearly a Greek default would be a bad thing, it is just not as damaging as it would have been in the past. Many of the debt holders at that point were banks of other nationalities, which caused the contagion concerns. Much of Greek debt is now held by hedge funds and the IMF.

The other concern is their potential exit from the Euro. This could spur the Dollar higher. A higher dollar makes it tough for blue chip stocks in the US to perform well. Ultimately the Euro should benefit from a Greek exit as it removes its instability from an otherwise healthy union.


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