Tags: Federal Reserve | stocks | market | rally

Federal Reserve's Inaction Buys Time for Year-End Rally

By    |   Thursday, 27 August 2015 11:01 AM

For the first half of the day Wednesday looked like a repeat of Tuesday, but the selling wave failed to kick in, and instead a strong “relief rally” occurred that will allow bulls to write this episode off as a “never mind,” but the most persuasive commentary expects some aftershocks to occur, especially once the full complement of traders reports for work after the late Labor Day.

Perhaps the relief was prompted by an exasperatingly equivocal speech by New York Fed President William Dudley, former Chief Economist at Goldman Sachs, in which he said a September rate hike is “less compelling” but allowed that this assessment could change based on further data. He also joined those saying the current market volatility is imported from abroad.

Willie Chan, Asia Regional Strategist at Maybank Kim Eng, tells CNBC’s Martin Soong that he is unimpressed by the actions of the authorities in both China and the US, and he expects weak earnings reports and further market weakness, at least another leg down in both markets. In the next clip, CNBC’s Dominic Chu presents a comparison of the behavior of the VIX to that of 2008 and also refers to oil prices as evidence to back Mr. Dudley’s case that the US is not in a financial crisis. This writer suspects that the country has never truly recovered from 2008.

Dennis Debusschere, of Evercore ISI, son of a New York basketball legend,looks at conditions that may be setting up for a fourth quarter rally based on historic performance after a period of weakness like the present one, and he refutes the argument that this weakness was made in China. He presents a chart of the relationship between earnings multiples and inflation expectations that questions what he considers the “fantasy” that multiples can continue to expand on their own without some resurgence of inflation expectations. In response to a question from Melissa Lee about the relationship to weak commodity prices, Debusschere ventures that weakness in the economy is likely to constrain earnings, both in the US and globally, for years.


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Robert-Feinberg
For the first half of the day Wednesday looked like a repeat of Tuesday, but the selling wave failed to kick in, and instead a strong "relief rally" occurred.
Federal Reserve, stocks, market, rally
346
2015-01-27
Thursday, 27 August 2015 11:01 AM
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