I ran a poll last week to get a gauge of how many times the Fed will raise rates in 2017. Over 1,000 votes were tabulated which was good enough for most 2016 Presidential voting polls. I consider 1,000 votes from my followers to be a much better and unbiased gauge of the market than any other poll put out by some $29.99 newsletter slinger.
Poll: How many times will the Fed raise rates in 2017?
— ♿️ Ramp Capital™♿️ (@RampCapitalLLC) January 3, 2017
The responses were fairly evenly spread out if you combine “cut rates” with “zero”. Therefore, 1/3 of people think the Fed will cut or not hike at all, 1/3 think one hike, and 1/3 think two or more hikes are on the way. Fair enough. Let’s see what some of our friends think…
For those not in tune with the Fed dates, below is the full calendar for the potential to hike multiple times or kick the can throughout the year.
I can promise you this: the longer the Dow stays below the all-important 20,000 level, the longer the Fed continues to kick the can. Lest we not forget that the Fed has only hiked two times in the past 10 years. I also imagine Trump is still waiting for a handwritten thank you letter and Christmas card from the Fed for allowing them to hike with confidence after the election without having to endure the same outcome that came from the first hike back in December 2015. The fact that the market was unwavered by the 2nd hike in a decade shows to the strength of the rhetoric and pro-business and pro-growth policies that Donald Trump has been preaching.
The reason Fed policy is so difficult to predict is because the market is difficult to predict. Most likely they use too many metrics so that if 1 out of 99 of them flashes a red warning signal they can justify kicking the can. Also risks and ramps happen fast. Right now they are playing catch up. If the economy and Dow continue to improve then yes we could see multiple hikes in 2017. But, if we get one hint of uncertainty, you better believe the Fed will sit on their hands and let the market come back into their playing field. Right now it’s President-elect Trump’s move with the inauguration looming next week. If we get a buy the election sell the inauguration outcome we will continue to see the Fed sit on their hands for the time being and the Dot Plot will be reorganized once again.
I’ll set a mental note to circle back to this article after the December meeting to see how we did.
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Full Disclosure: Each “rate hike” is considered a 0.25 basis point hike, nothing larger, nothing smaller.