Case for a Rate Hike---8/26/2016

It is always difficult to understand the markets, if you aren't in the trenches day in and day out.  The slogan on the home page is...

 

 "To be at peace with your position in the Capital Markets, you must put in constant and diligent effort to comprehend what makes the markets move."

 

I put it there, and leave it there, because it is so very true.  An example today is the fact that the markets are rallying after Yellen says the case has been made for a rate hike soon.  However when they hiked rates in late 2015, the markets began to fall apart.  Why two opposite reactions to the same phenomena?  Well...if you've been reading my posts here, you will have noted that I have been saying that market participants are WAY under-weight equities.  I've also explained that this means when bad news hits, there may not be a lot of selling...because investors have already sold.  And the flip side is true too.  If positive news hits, there will have to be a lot of buying just to get portfolios back to a neutral position...not to mention bullishly positioned.

 

So, what is happening?  News flows have been less negative than expected and in some cases the news has been positive.  This means that the cash on the sidelines just might jump back in the game...and send markets higher.