Market Digest – Week Ending 9/11
Stocks rose in a short holiday week that featured relatively light news flow. Markets seem to be looking ahead toward next week’s Fed meeting to see if short rates will be hiked for the first time since June, 2006. China released more soft economic data but it was outweighed by optimistic comments from government officials. Apple’s annual product announcements revealed few major surprises, but were enough to lift the stock more than the overall market.
S&P 500: 1,961 (+2.0%)
FTSE All-World ex-US: (+3.0%)
US 10 Year Treasury Yield: 2.19% (+0.07%)
Gold: $1,107 (-1.2%)
USD/EUR: $1.134 (+1.7%)
Tuesday – Blackstone announced it will buy Strategic Hotels group for about $4 billion.
Tuesday – Islamic State fighters advanced on a town in northern Syria close to a vital supply route for Syrian rebels.
Wednesday – Warren Buffet blamed texting for a 14% rise in fatal auto accidents in the first half of 2015.
Wednesday – Standard & Poor’s downgraded Brazil’s credit rating to junk, sending the real to its lowest level since 2002.
Wednesday – Apple revealed its new iPhone, iPad and Apple TV lines, as well as a partnership with Hermes for bands for the Apple Watch.
Thursday – Chinese Premier Li Keqiang said China’s reforms are on track and recent volatility wouldn’t affect the country’s economic trajectory.
Friday – Hungarian Prime Minister Viktor Orban on Friday warned the European Union not to impose a plan for sharing migrants across the bloc.
After massive amounts of speculation, the week of the “September Fed Meeting” is upon us. We have just two comments.
First, whenever a lot of very smart people think one thing will happen and a lot of other really smart people think something else will happen, the best think to conclude is there is no way to know what will happen. The Fed might raise rates next week or they might not. It is starting to seem more like not, but it would be foolish to be too confident in any prediction.
Second, the decision may cause some short term market volatility, but otherwise doesn’t matter all that much. 0.25% higher interest rates are not going to move the needle on many economic decisions. The Fed seems pretty determined to raise rates slowly and steadily over the next few years. When exactly it starts shouldn’t be a big deal. That said, if your portfolio has slowly drifted toward a random collection of securities bought to provide yield in a zero interest rate environment, now is the time to rethink it and get more strategically diversified. Higher rates could generate selling pressure on securities owned primarily for their yield.