Our thesis was that the Fed’s zero interest rate policy (ZIRP) wasn’t doing anything for the economy and that a rate hike would actually be viewed as a vote of confidence in the current slow growth economy.
Main Street may not be enjoying a boom, but Wall Street is doing just fine. Thanks to corporate actions to improve profitability, the continued emergence of new products and technology, and a drop in oil prices caused by huge supplies of new energy, companies are reporting record earnings.
Yes, there are pockets of weakness caused in part by an inevitable slowdown in Chinese growth and its insatiable appetite for raw materials, but here in the U.S. the low interest rates are hurting savers more than they’re helping the economy.
Today the Fed announced a much anticipated 0.25% hike in rates. Despite predictions in some corners of a market sell-off, the DJIA rose by 1.28%, the S&P 500 rose by 1.45% and the NASDAQ by 1.52%.
Thank you Fed. It’s long overdue.