Rate on, Race On | Calamatta Cuschieri

Time to Signal the Hike?

Markets kicked off the penultimate month of the year with a sell off across most asset classes. Stocks and bonds fell across the board in major markets, after positive economic data out of China and the US eased concerns about a global slowdown and seemingly ‘greenlighted’ the imminent increase in interest rates by the US Federal Reserve.

Markets fell in general, for different reasons. The bond sell-off was mostly driven by renewed and heightened expectations of a rate hike in 2016, while stocks sold off on news of tightening US election polls. A win for the Democrats was being largely priced in, and any threat to that consensus tends to spark a sell-off.

It is extremely difficult to analyse both events in isolation, and to credit one with more weight than the other. But markets are traditionally not very focused on the long-term, and tend to focus on the now. Currently, that means looking towards the end of the two-day Federal Reserve meeting which is just round the corner (make that tonight).

Traders and analysts are now expecting a somewhat firm commitment by the US central bank to raise interest rates in December and, possibly, to signal the future rate path. Expect this to be more of a market mover on Wednesday and Thursday, before the focus shifts once again to the US presidential election.

Politics in FocUS

Less than one week to go before Barack Obama is no longer the president of the United States of America and it seems the race couldn’t be tighter, at least according the latest Washington Post – ABC News poll. Other sources say that Democrat Hillary Clinton is still leading the national polls albeit with a diminished lead after the FBI said it would open a new probe into her notoriously disastrous handling of confidential emails.

Some markets were more sensitive to the news than others – cue the Mexican peso which tumbled on news Trump was making a comeback. With uncertainty on the rise, most stock indices sold off while gold and silver rallied, with the latter chalking up an impressive rise of over 3.5% intraday. Gold is trading just below $1,300 per ounce as at time of writing. This morning’s Asian session also ended well in the red, and it seems the European session also kept up the negative momentum.

Whatever the result, this election – or rather this campaign – will probably be remembered more for the theatrics rather than the substance, as leaked emails, claims of corruption and tax evasion, sexist remarks and racist propaganda took over concrete policy proposals in all major fora.

This article was issued by Andrew Martinelli, Trader at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investments Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.