September 22nd, 2015 | Market Update
Week in Review
The big news in global markets right now is the Fed's decision to postpone interest rate hikes. The Fed's resolution on Thursday is a reversal of their previous stance in June of this year.
Of course, investors have been on both sides of the fence regarding which direction the Fed should take. However, many foreign markets did fall early this morning in response to the Fed's announcement.
Why the reversal?
As Chairwoman Janet Yellen said on Thursday, In light of the developments that we have seen and the impacts on financial markets, we want to take a little bit more time to evaluate the likely impacts on the United States. It's important to remember that the Fed is a policy making body, and their objectives is the long term health of the U.S. economy. Although most indicators are showing that our domestic economy is healthy, there are concerns about the affect that global volatility will have on domestic markets and how they will affect growth.
The real question is: how will this move by the Fed be perceived by investors? Will foreign investors see this as a lack of confidence in the global economy? Will it be seen as a domestic move? Is it a reprieve for emerging markets? Uncertainty in the markets generally leads to volatility, and the Fed's decision to postpone the much anticipated rate hike (9-years in the making) will most likely cause further volatility.
A Look at The Markets
As of yesterday, the S&P 500 still remains at a 7.59% loss from 8/1/2015. The volatility in global markets have continued over the last few weeks, with slight gains over the last 7-10 trading days. However, with the recent Fed announcement, all bets are off on whether the upward trend will continue or reverse itself.
Additionally, while the markets may rebound over the next few weeks, the core issues that the markets are reacting to - China, Greece, the Fed, Emerging Markets, and Oil prices - will continue to remain issues.
The chart above provided by Yahoo! Finance, showing the S&P 500 from 8/1/2015 to 9/23/2015.
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