“It’s a wonderful hike’ is the quip one economist used to describe the first rate rise from the US Federal Reserve in almost a decade. Equity markets around the world seemed to agree.
The interest rate rose by a quarter of 1%. Financial markets have been toying with a possible rate rise for 18 months or so now and at long last it arrived. Markets don’t like uncertainty and duly responded with a relief rally with European equities rising 3% on the day. US markets also rose strongly.
There has had to be a fine balance between the interpretation of what is good news and bad news. The statement from Janet Yellen appeared to deliver confidence but she was also measured about how quickly rates would continue rising.
There are always concerns when interest rates rise but it is important to appreciate that all asset classes do not respond in the same way. The key is how you position your portfolio. We have reached an inflection point and more than ever it is important to seek expert advice.
