Sunday, December 18, 2016

Rate Hike Can Cause Economy To Slow Again: Bearish

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*Last year's rate hike preceded a slowdown in the Fed's key economic measure, non-farm payrolls.

*The same impact this year would be a problem because we are starting from a lower base.

*The Fed is more hawkish at weaker economic levels which should be a stock market risk.

Last year's rate hike in December preceded a slowdown in the Fed's key growth measure, non-farm payrolls ("NFP"). At that time NFP started from a much higher level. If a slowdown were to occur again from this lower level, which is very possible that would be a concern for equity markets (NYSEARCA:SPY).
Non Farm Payrolls Last Year

When the Fed hiked rates in December of 2015 non-farm payrolls were much higher than they are today. You can see above that after December the pace of new jobs in the US slowed materially. Higher rates may have slowed down a fragile economy.
Non Farm Payrolls this Year

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