Sunday, June 18, 2006

He shoots! He misses!

THIS IS HOW many stock market investors will feel in a few months.

What I find very interesting is that a few months ago, there was so much speculation whether the FED would stop hiking interest rates.

“They will do it once more, and then stop” was the general market consensus since the beginning of the year. We were right in one sense, when the FED DID meet, they DID increase the rates – but what we were SO wrong about is that they would stop. In fact, they left the door wide open for more rate hikes.

And now, we are seeing the effects this has on the markets. One of the biggest fears in the markets is : Uncertainty.

With the latest data showing that a rate hike in June is certain, the biggest uncertainty is whether the FED will go TOO far - triggering a economic MELTDOWN.

Well, maybe that is a little too far of a term, but an economic slowdown is certainly on the rise. And while all this could be CERTAIN to occur, the biggest UNCERTAINTY is WHEN this all will occur.

Its only until recently when we have started reading more articles from FED representatives on economic slowdown, global slowdown, and keeping the housing market from busting. (refer the latest: Fed's Hoenig warns on growth hit from imbalances).

With all this information becoming modominantent in the market spotlight, it makes for many to think that the FED may overshoot the comfort zone, triggering a sooner economic slowdown than expected.

We'll have to wait and see.


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