An improving economy suggests that “good inflation” is here to stay. However, the Fed has to ensure that the economy doesn’t overheat.
Commodities are a good hedge against inflation. Most commodities–except precious metals–including oil and food produce are a source of inflation.
As oil prices bottomed out in early 2016, inflation started to take off. Headline inflation was at 2.5% in January—near a five-year high.
Gold prices traded in a narrow range on March 15, 2017, after the Fed’s rate hike decision. On March 16, 2017, gold is moving in a positive direction.
After showing a huge fall in performance, crude oil prices recovered on March 15. Crude oil prices rose nearly 1.3% on the same day as the Fed’s decision.
On March 15, 2017, after the Fed announced the rate hike, the US Dollar Index experienced a sharp fall. It fell nearly 1% on the same day.
After the FOMC (Federal Open Market Committee) declared that it raised the key interest rate for the first time in 2017, the market reacted calmly.
On March 15, 2017, the Fed announced its much-awaited interest rate hike—the first increase this year. It’s the third rate hike in the past decade.
The Fed’s more hawkish tone is one of the major reasons behind the rising expectations for the financial sector.
The ten-year US Treasury yield was close to its one-month high of 2.6% on March 13, 2017, amid expectations of a rise in the Fed’s key interest rate on March 15, 2017.
Investors generally look for short-term duration bonds in the midst of a rising interest rate scenario.
Fed chair Janet Yellen recently said at the Executives’ Club of Chicago that the economy is showing strength. The Fed is sounding more hawkish in regards to a March rate hike.
A short-term corporate bond offers investors with a lower risk profile to invest in fixed income securities with intermediate or short-term maturities.
An interest rate hedged ETF usually takes a short position in the interest rate swaps. It makes the duration of the portfolio zero.
Senior loans offer floating rate coupons and have low interest rate sensitivity. They provide the perfect hedge for rising interest rate environments.
The 30-year Treasury yield was close to its month high as of March 10, 2017, at 3.20% in anticipation of an interest rate hike by the Fed on March 15, 2017.
Germany’s improved price competitiveness and its innovations in the manufacturing sectors positively impacted its exports in 2016.
Germany’s unemployment rate was lower at 3.8% in December 2016, as compared to the pre-crisis level of 11.3% in 2003.
Germany’s expected rise in inflation is concerning as the cost of borrowing has increased across Europe—and this amid all the political uncertainty.
Consumer confidence in Germany rose more than expected in February 2017, reflecting the recent boost in its market performance