Today (14th Dec), the US Federal Reserve increases its short term rates to 0.5-0.75 per cent. The US Fed expects that in the 2017, the US economy will gain momentum and stimulus from the likely Fed tax cut promised by the President-elect. Given the possible inflation and fiscal stimulus, the US Federal Reserve has decided it is the right time to raise rates.
However, I feel that the US Federal Reserve may be too optimist about the US economic performance in 2017. I believe 2017 is a year with a great number of uncertainties and different expectations about how the world economy is performing in 2017 which lead to different strategies and policies.
Different opinions in the market mean that after a certain period of time, players with different opinions will have very different returns and some will lose the competition and leave the market. The winners can exploit the losers as much as possible and the government has no incentives to intervene the market and rescue the losers. The market could be more concentrated as many players may leave the market and leave their resources to the winners.
In addition, as some firms become extremely successful and some firms fail to stay in the markets, the population will be influenced and the wealth gap in the society could be wider than ever.
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