BNY Mellon Global Markets – Weekly Market Commentary


As the song continues…if I go there will be trouble, and if I stay there will be double. These Clash lyrics so accurately state the debate going on in the financial markets regarding a Fed liftoff tomorrow that there is not much we can add to it. Effectively, the lines are drawn that the global economy, from commodities, the emerging markets and risk assets are ill equipped to handle the volatility that would ensue if the Fed hikes rates this week. On the other side of the aisle are those that feel staying effectively at zero rates invites future inflation, erodes confidence in the Fed’s ability to ever raise rates, all with very little tangible evidence that it will spur sustainable growth. The Fed has no doubt debated this and the plethora of other issues over the past week and are presently arguing how to put together the policy statement. By now, we and practically every other analyst have said all we can say about Thursday, our beds are made and we shall lie in them. The future market puts the odds for a hike at 1/3, slightly higher over the past week, but also demonstrating the challenge that the market applies to the FOMC’s task. The economist/strategist community has the probability a bit higher, but we suspect that the conviction of the yea crowd has waned over the past 4 weeks. All manners of scenarios are being discussed as there is little other news impacting the markets this week. The latest is the concept of a 1/8 of a percent increase, which we personally find silly and hope that they feel confident enough to get this move out of the way so we can move the conversation beyond a date on the calendar. We suspect that if they do not go, they will not give up the ghost for 2015, and we will then move the debate to October versus December.

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