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Posted by on Oct 14, 2015 in Market Insight, Partnervest Financial Group

Fed Action: Low & Slow

Fed Action: Low & Slow

By James Herrell, CFA, Director of Investments at Partnervest Financial Group, and Portfolio Manager of the AdvisorShares STAR Global Buy-Write ETF (VEGA)   In what may at first seem to be a counterintuitive reaction, stocks did not immediately rise when the Fed made the decision to leave rates unchanged at their September meeting. Aren’t low interest rates a positive for the market? Not always. It appears that the dip following the Fed announcement was due more to the acknowledegement of a global economic slowdown, and fears about the effect on the U.S. economy. The present situation notwithstanding, low-to-zero interest rates have indeed had a positive impact on U.S. equity prices. After nearly seven years of stimulus, the result has been a surge in stock prices to new highs and beyond. Rising interest rates, when they finally occur, may turn out to be a positive factor as well, especially when they commence from low levels. Consider the following chart showing the performance of the S&P 500 and the level of...

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Posted by on Sep 17, 2015 in Market Insight, Partnervest Financial Group

Flexibility For The Fed

Flexibility For The Fed

By James Herrell, CFA, Director of Investments at Partnervest Financial Group, and Portfolio Manager of the AdvisorShares STAR Global Buy-Write ETF (VEGA)   The Federal Reserve appears to be all set to begin raising interest rates possibly as early as this Thursday. Economic conditions are favorable for liftoff; with strength in the housing market, positive GDP growth and the unemployment rate back down to 5.1%. This last data point in particular carries added weight, as the Fed has long maintained that it would not raise rates until job growth improved. The consensus seems to be for a “low and slow” trajectory of interest rate hikes, beginning this year, and continuing into 2016. The Federal Reserve meets 8 times per year, and if they hiked rates just 0.25% every other meeting, the overnight Fed Funds rate would be at 1% in a year. What might cause the Fed to pause? Overseas weakness, China in particular, might cause them to wait for fear of derailing the Chinese government’s stimulus and stability...

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