Investors have reacted positively to the Federal Reserve's decision last month to adopt a "patient' stance on raising interest rates, but that stance might cause trouble for the stock market, says
Wall Street Journal columnist Spencer Jakab.
"Corporate profits face a potential triple whammy," he writes.
First, foreign money is flowing like wine into Treasurys. That, in turn, has boosted the dollar. And "with more than 40 percent of S&P 500 revenue earned abroad, dollar strength will pinch sales and margins," Jakab predicts.
"Meanwhile, the shrinking spread between short and long [interest] rates may squeeze profits of U.S. financial firms. Finally, the reason foreign central banks are out of sync with the Fed is that their economies are flirting with recession and even deflation — hardly good news."
By "out of sync," Jakab means that foreign central banks are easing while the Fed tightens.
"For investors used to cheering ultra-low interest rates, this may be a case of being careful what they wish for," he writes.
Meanwhile, one of the 10 biggest surprises that
Byron Wien, vice chairman of Blackstone Advisory Partners, sees for 2015 is that the Fed "finally raises short-term interest rates, well before the middle of the year, encouraged by the improving employment data and strong Gross Domestic Product growth," he writes.
"The timing proves faulty, however, as the momentum of the economy has begun to flag and a short-term slowdown has started. The end of monetary accommodation and rising rates precipitate a correction in equities."
The Fed has kept its federal funds rate target at a record zero to 0.25 percent for six years. Most economists expect it to begin raising rates around mid-year.
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