In previous blogs, we commented on the overvaluation of the markets prior to September, and that the downturn would end in October. As all of this has come to fruition and we have retraced almost all that was lost prior to the downturn, the question that arises is: Where do we go from here?
As far as stocks go, we had indicated that the market would go higher in the short term, and most likely put in a positive return for the quarter. Today we should discuss the expected rise in interest rates from the Federal Reserve. While we expect the Fed to finally end bond buying in today’s announcement, the raising of short term rates is now on the table for the near future. Some on Wall Street expect the raising of short term interest rates in the end of the second quarter, and some don’t expect that rate to change until later in the year. Our expectation of interest rates is that they will go up next year. However, we do not see the longer end of the yield curve moving up in any dramatic fashion. The table is set to move short term interest rates higher. We anticipate this process to be slower than expected and longer dated bonds to move even more slowly.