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2 Jan 2015
Fed hike could spell trouble for US stocks – Comstoc
FXStreet (Barcelona) - The Comstock Partners Team note that a Fed rate hike in 2015 could spell trouble for the already overvalued US stocks, as it was previously seen after the ending of QE1 and QE2.
Key quotes
“In December, the U.S. stock market staged a furious comeback rally following a rapid and substantial decline. Just prior to the latest upturn, the market seemed ready and poised for further and even more substantial declines.”
“The rally appears to have been precipitated by the Fed substituting the word “patience” for “considerable time” in their latest policy statement. While we were disappointed that the markets rallied based on the simple parsing of words, we remain convinced that deflation, overvaluation, and Fed policy in response have intertwined to cause one of the largest stock market bubbles in history.”
“Importantly, the velocity (turnover of money) of the M2 money supply has remained near the lows of the past 60 years. That statistic serves as proof that the Fed’s efforts are getting very little “bang for the buck”.
“As you all know energy prices have been collapsing, as supply is overwhelming demand--many think that energy prices are holding back the U.S. bull market by hurting other countries abroad. Soon they will realize that the commodity price decline is caused by the global distress--not the other way around.”
“The Fed is about to raise interest rates sometime in 2015 (for the first time in 6 years), and that could be trouble for stocks just as it was after the ending QE-1, and QE 2. On the other hand, if they don’t raise rates it would only be based on failed QE policies that were supposed to revive the economy. This is the incredible dilemma that the Fed faces in the coming year.”
Key quotes
“In December, the U.S. stock market staged a furious comeback rally following a rapid and substantial decline. Just prior to the latest upturn, the market seemed ready and poised for further and even more substantial declines.”
“The rally appears to have been precipitated by the Fed substituting the word “patience” for “considerable time” in their latest policy statement. While we were disappointed that the markets rallied based on the simple parsing of words, we remain convinced that deflation, overvaluation, and Fed policy in response have intertwined to cause one of the largest stock market bubbles in history.”
“Importantly, the velocity (turnover of money) of the M2 money supply has remained near the lows of the past 60 years. That statistic serves as proof that the Fed’s efforts are getting very little “bang for the buck”.
“As you all know energy prices have been collapsing, as supply is overwhelming demand--many think that energy prices are holding back the U.S. bull market by hurting other countries abroad. Soon they will realize that the commodity price decline is caused by the global distress--not the other way around.”
“The Fed is about to raise interest rates sometime in 2015 (for the first time in 6 years), and that could be trouble for stocks just as it was after the ending QE-1, and QE 2. On the other hand, if they don’t raise rates it would only be based on failed QE policies that were supposed to revive the economy. This is the incredible dilemma that the Fed faces in the coming year.”