U.S. Federal Reserve officials sent out their clearest message yet that they would hike interest rates next month as the Dow and S&P 500 remained near their all time highs and the Nasdaq recorded its highest ever level at the end of the week.
Janet Yellen, Fed chair, mentioned last Wednesday that the central bank would change interest rates “in the not too distant future” and according to Thomson Reuters reports, traders are now pricing in an 80 percent chance of a hike before the year is out.
Some other Fed officials, like St. Louis Fed President James Bullard, have also said that the focus is now very much on the central bank’s course of action regarding rates in 2017, further enhancing the probability that they will hike rates next month.
Since republican candidate Donald Trump pulled off a surprise triumph in his bid to secure the White House, U.S. stocks have been on a whirlwind rally based on his pledges to boost fiscal spending, especially on infrastructure projects within America, and reduce corporate and private taxes.
Those factors are seen to be strong plus points for the U.S. economy, but the stellar U.S. stock performance levelled off slightly this week as investors waited for Trumps announcements in relation to his appointments to administrative posts.
“We’re advising clients to hold off at the moment and await some clarity on many of the President-elect’s policies,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management in an email to investors yesterday.
“We need to be aware that this sudden spurt in growth, especially with financials, may just be a knee jerk high based on flimsy perceptions of what might happen under a Trump administration. Caution is required at this point in time.” Poulson added.
The Nasdaq hit a record high of 18,879.46 today and it closed yesterday just 3 points lower from that historic figure, while the Dow Jones Industrial average lost 23.98 points, or 0.12 percent. The S&P 500 hit a record peak this time last month and closed slightly down on that high at 2,193.80.
