The Fed, after frustrating and teasing markets for many months, picked a point when it would normally be talking about being more accommodative to drain market liquidity with its first rate increase in years. We have been talking about this dynamic all year and feel free to read any of our past posts if so inclined.
We will only emphasize that corporate earnings, equity market breadth, the industrial economy, emerging market debt, and the corporate bond market have deteriorated further since we last wrote. We are sure you likely have better things to do than to go into further detail because it has all been said before.
As for the actual significance of the change in monetary policy, suffice it to say that the drain in market liquidity is much more meaningful than what might be implied by a paltry 25 basis point hike in rates because the Fed was once again too easy for too long and dominated market functioning to a degree we all hoped would never take place.
As investors, we take no joy in sounding like Scrooge…but the Fed leaves little choice.
On a personal note – Merry Christmas one and all!
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