Thursday 15 October 2015

Bad news stops the Fed raising rates, so it is Good News! Is there anything wrong with this logic?

Bad situations have made the market so happy that the common believe that the situation will force the Fed to withdraw its plan of raising rates by the end of this year. Even after Goldman Sachs announcing its quarter profits down 39 percent from 2014, the share price of Goldman Sachs has stayed relatively stable. The drop of the profits could be foreseen by the poor performance of the financial market this quarter; meanwhile, such report could put pressure on the Fed's decision on the rate changing. The current situation is like: "bad things happen to stop more bad things happening". We have foreseen most of the bad news, maybe some of them is actually worse. However, we have stopped being panic about the bad news we have already predicted. We start to think the bad news could stop the others from taking more unwelcome actions, especially the US Fed. This is a very worrying thing. I think we need to take positive actions to restore the market confidence, instead of sitting and waiting for the news coming. Because the market may be recovering itself, but if there is any piece of information that is out of our expectation, it will create a huge shock in the market.

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