Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Markets & Finance

A Fearless Market

By Joseph Lisanti When the Federal Open Market Committee (FOMC) raised short-term rates for the 13th time on December 13, nobody was surprised. And despite ancient fears of the number 13, the market wasn't spooked. In fact, it rallied. Clearly, Wall Street doesn't suffer from triskaidekaphobia.

More likely, many market participants now feel fairly certain that the Fed is close to the end of its tightening cycle. We agree, but there's nothing new in that. Standard & Poor's economists have been forecasting that the tightening will end when the fed funds rate (what member banks charge each other for overnight loans) reaches 4.75% sometime in the first quarter of 2006. So what's different?

The statement by the Fed did not include the familiar wording that "policy accommodation can be removed at a pace that is likely to be measured." In other words, the 25-basis-point increase that has become the hallmark of recent Fed meetings will no longer be automatic. Instead, the Fed will let the economic data determine whether rates should go higher. Some traders assumed that the end of automatic rate increases meant the end of all rate increases.

Two days after the Fed action, stocks weakened. We think this came from the realization on the part of traders that the tightening is not over yet. That day's report of a 0.7% rise in industrial production for November, on top of the 1.3% jump in October, caused some people to worry about rate hikes once again.

In our view, those fears are overblown. The year-over-year change in the consumer price index decelerated to 3.5% in November from 4.3% in October as energy prices retreated. And high fuel costs don't appear to have seeped into other prices. Core CPI, which excludes food and energy, remained stable at 2.1%.

Overall, we see the Fed hiking rates only two more times, and think this augurs well for stocks in the coming year. Lisanti is editor of Standard & Poor's weekly investing newsletter, The Outlook

blog comments powered by Disqus