Hugh Johnson
Hugh Johnson
Hugh Johnson OBEis a British author and expert on wine. He is considered the world's best-selling wine writer. His 1961 tasting of a bottle of 1540 Steinwein from the German vineyard Würzburger Stein is considered to potentially be one of the oldest wines to have ever been tasted...
ProfessionNon-Fiction Author
Date of Birth10 March 1939
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It was almost a sure bet that the Fed was going to raise rates in June. Now it's almost a sure bet, say 50-50 at least, that they won't move in June.
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The stock market has been closely connected to the bond market in the last two weeks, and today's stabilizing interest rates is probably the No. 1 reason behind the gains.
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Is the possibility of a tax cut and a rate cut enough to eliminate or neutralized the concerns about the economy and earnings, letting the January effect play out, ... Watch the overall market and if the shift from defensive stocks to economically-sensitive stocks continues, it may be enough to turn the tide.
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The worry is that the lid, or the cap, on interest rates is now off.
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The rise in oil prices and concern over the Fed's interest rate policy are very troubling to the market. That's going to present a challenge to this rally.
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You know, we had four great years because we had declining inflation and interest rates. There's been a sea change. We now have inflation and interest rates actually heading higher. That makes things entirely different - you can't get away with high-priced earnings or overvalued stocks and so we're going through this adjustment to a new reality.
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The recent rise in interest rates has created some uncertainty about the bull market's longevity.
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The biggest risk in 2006 is that the Fed will be seduced by worries about inflation into raising rates too high. A lot depends on what the 10-year does and while I would hope that they would take notice that it's going down in yield, the question is whether they will take it seriously or dismiss it.
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It will eventually slow the growth rate of earnings. Therefore you should own companies with low price-earnings ratios, not high price-earnings ratios.
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It will eventually slow the growth rate of earnings,
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It's a migration toward value as a reflection that investors believe the growth rates of earnings are slowing. It will continue until investors are convinced that the Fed will take its foot off the break, or reduce interest rates.
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It's a reasonably accepted conclusion that the Fed will raise rates in both June and August; that's what the market has discounted. I don't know if Friday's employment report will change that, no matter what it says.
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We had a very solid move up in stocks in the first quarter. There's a good chance that what the markets will be left with is a great deal of uncertainty or even the belief that more rate increases are coming.
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When it appears as though the governors of the Federal Reserve believe that the end of the rate increases is near, that's very good news for investors. A lack of ambiguity from the Federal Reserve is always a little bit of a shocker.